MEDICARE PART D:

IMPLEMENTATION OF THE NEW

DRUG BENEFIT
HEARING
BEFORE THE

SUBCOMMITTEE ON HEALTH
OF THE

COMMITTEE ON ENERGY AND

COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
MARCH 1, 2006

Serial No. 109-129

Printed for the use of the Committee on Energy and Commerce

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COMMITTEE ON ENERGY AND COMMERCE

JOE BARTON, Texas, Chairman
JOHN D. DINGELL, Michigan
RALPH M. HALL, Texas
MICHAEL BILIRAKIS, Florida
Ranking Member
Vice Chairman
HENRY A. WAXMAN, California
EDWARD J. MARKEY, Massachusetts
FRED UPTON, Michigan
CLIFF STEARNS, Florida
RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio
EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia
FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky
SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia
BART GORDON, Tennessee
BARBARA CUBIN, Wyoming
BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois
ANNA G. ESHOO, California
HEATHER WILSON, New Mexico
BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York
CHARLES W. CHIP PICKERING, Mississippi
ALBERT R. WYNN, Maryland
Vice Chairman
GENE GREEN, Texas
TED STRICKLAND, Ohio
VITO FOSSELLA, New York
ROY BLUNT, Missouri
DIANA DEGETTE, Colorado
STEVE BUYER, Indiana
LOIS CAPPS, California
GEORGE RADANOVICH, California
MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire
TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania
JIM DAVIS, Florida
MARY BONO, California
JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon
HILDA L. SOLIS, California
LEE TERRY, Nebraska
CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey
JAY INSLEE, Washington
MIKE ROGERS, Michigan
TAMMY BALDWIN, Wisconsin
C.L. BUTCH OTTER, Idaho
MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
BUD ALBRIGHT, Staff Director
DAVID CAVICKE, General Counsel
REID P. F. STUNTZ, Minority Staff Director and Chief Counsel
SUBCOMMITTEE ON HEALTH
NATHAN DEAL, Georgia, Chairman
SHERROD BROWN, Ohio
RALPH M. HALL, Texas
MICHAEL BILIRAKIS, Florida
Ranking Member
FRED UPTON, Michigan
HENRY A. WAXMAN, California
PAUL E. GILLMOR, Ohio
EDOLPHUS TOWNS, New York
CHARLIE NORWOOD, Georgia
FRANK PALLONE, JR., New Jersey
BARBARA CUBIN, Wyoming
BART GORDON, Tennessee
JOHN SHIMKUS, Illinois
BOBBY L. RUSH, Illinois
JOHN B. SHADEGG, Arizona
ANNA G. ESHOO, California
CHARLES W. CHIP PICKERING, Mississippi
GENE GREEN, Texas
STEVE BUYER, Indiana
TED STRICKLAND, Ohio
JOSEPH R. PITTS, Pennsylvania
DIANA DEGETTE, Colorado
MARY BONO, California
LOIS CAPPS, California
MIKE FERGUSON, New Jersey
TOM ALLEN, Maine
MIKE ROGERS, Michigan
JIM DAVIS, Florida
SUE MYRICK, North Carolina
TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas
JOHN D. DINGELL, Michigan
(EX OFFICIO)
JOE BARTON, Texas
(EX OFFICIO)

(II)

CONTENTS
Page
Testimony of:
McClellan, Hon. Mark, Administrator, Centers for Medicare & Medicaid Services .......
Dennison, Anne ...................................................................................................................
Hickerson, Marcus ..............................................................................................................
Song, Dennis, Flower Mound Herbal Pharmacy, on behalf of National Community
Pharmacist Association ..................................................................................................
Paul, Tom, Chief Pharmacy Officer for Ovations, United Health Group ..........................
Walsh, Jude E., Special Assistant, Governors Office of Health Policy and Finance,
State of Maine ................................................................................................................
Ettienne, Earl, Senior RX Supervisor, CVS/Pharmacy ......................................................
Lipshutz, David A., Staff Attorney, California Health Advocates.....................................
Rawlings, Susan, President, Senior Services, WellPoint, Inc. ...........................................
Additional material submitted for the record:
McClellan, Hon. Mark, Administrator, Centers for Medicare & Medicaid Services,
response for the record ...................................................................................................

(III)

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MEDICARE PART D: IMPLEMENTATION

OF THE NEW DRUG BENEFIT
WEDNESDAY, MARCH 1, 2006

HOUSE OF REPRESENTATIVES,
COMMITTEE ON ENERGY AND COMMERCE,
SUBCOMMITTEE ON HEALTH,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:00 p.m., in Room
2123 of the Rayburn House Office Building, Hon. Nathan Deal
(chairman) presiding.
Members present: Representatives Deal, Hall, Bilirakis, Gillmor,
Norwood, Shimkus, Pickering, Buyer, Pitts, Ferguson, Burgess, Barton
(ex officio), Brown, Waxman, Towns, Pallone, Gordon, Rush, Eshoo,
Strickland, DeGette, Capps, Allen, Davis, Baldwin, and Dingell (ex
officio).
Staff present: Chuck Clapton, Chief Health Counsel; Melissa
Bartlett, Counsel; Ryan Long, Counsel; Nandan Kenkeremath, Counsel;
Bill OBrien, Research Assistant; David Rosenfeld, Counsel; Brandon
Clark, Policy Coordinator; John Ford, Minority Counsel; Chris Knauer,
Minority Investigator; Purvee Kempf, Minority Counsel; Amy Hall,
Minority Health Professional Staff Member; Bridgett Taylor, Minority
Health Professional Staff Member; Jessica McNiece, Minority Research
Assistant; Jonathan Brater, Minority Staff Assistant; and Chad Grant,
Legislative Clerk.
MR. DEAL. The meeting will come to order. If someone would get
the door in the back, please. The Chair recognizes himself for an
opening statement. We are pleased to have Dr. McClellan here as our
member of our first panel and another rather distinguished second panel
that will follow shortly thereafter. The purpose of the hearing today is to
examine the implementation of the new Medicare prescription drug
benefit. Today, I believe, marks the sixtieth day of the implementation
of the biggest change to Medicare in its 40-year history. Like most
significant programs, the new benefit has not gone without a few isolated
glitches and unexpected problems, but I believe that if there is anything
wrong with the plan, most of it has been fixed and that that hasnt can be
fixed over time. In fact, I understand that most of the early glitches in
the program have already been resolved thanks to the hard work and
cooperation of CMS, pharmacists who are dealing with it on a daily
basis, and the prescription drug plans, themselves.
(1)

Because of this new benefit, Americas senior citizens are better off,
and today more than 25 million Medicare beneficiaries are receiving
benefits under this new Medicare prescription drug benefit. This
includes more than 5.3 million beneficiaries who have signed up
individually for prescription drug coverage in the last three months,
including 1.5 million who have signed up in the last 30 days.
The new prescription drug benefit is working for American citizens
because of the hard work and commitment by pharmacists, physicians,
plan employees, public administrators in the States, Dr. McClellan and
his staff at CMS. Also, by all the cooperation of family and friends of
Medicare beneficiaries who take the time to help their loved ones sign up
for the plan and to make the right choices that they think meet their
individual needs.
I talked with constituents in my district and many of them tell me
that before the implementation of this benefit, they were spending
several hundred dollars out of their own pocket on prescription drugs.
Many times it was equal to, and in some cases even exceeding, their
Social Security benefits. Today, many of these constituents are now
spending less than $100 a month thanks to this new prescription drug
benefit. Many of them tell me that sometimes the money they didnt
have for drugs, they had to put on credit cards or ask family members to
assist in paying for those benefits, and by having this benefit available it
has restored their personal dignity.
Anything that you try to do is going to have objectors, and we have
certainly had our share of objectors, and we will hear some of those
objections, I am sure, here today. Many of us have held town hall
meetings across our districts and have provided assistance in enrolling
seniors into programs. Others have not been quite so cooperative in that
effort, but many of my colleagues on this committee have done exactly
that -- both Democrats and Republicans. I thank them for that, because I
think it is our obligation to assist seniors in making this benefit package
work for them.
I want to thank our expert panel of witnesses for taking their time to
come and we are going to hear a variety of points of view, obviously, in
a panel as large as the second panel will be. I look forward to hearing
your testimony. Thank you again and at this time I would recognize the
Ranking Member, Mr. Brown.
[The prepared statement of Hon. Nathan Deal follows:]
PREPARED STATEMENT OF THE HON. NATHAN DEAL, CHAIRMAN, SUBCOMMITTEE ON
HEALTH

The Committee will come to order and the Chair recognizes himself for an opening
statement.

The purpose of this hearing is to examine the implementation of the new Medicare
prescription drug benefit.
Today marks the 60th day of the implementation of the biggest change to Medicare in
the 40 year history of the program.
And like most significant new programs, this new benefit has not gone without a few
isolated glitches and unexpected problems.
However, I believe that there isnt anything wrong with the Medicare prescription
drug benefit that cannot be fixed with time.
o In fact, I understand that most of the early glitches in the program have
already been resolved thanks to the hard work and cooperation of CMS,
pharmacists, and the prescription drug plans.
Because of this new benefit, Americas senior citizens are better off.
Today, more than 25 million Medicare beneficiaries are now receiving benefits under
the new Medicare prescription drug benefit
o This includes more than 5.3 million beneficiaries who have signed up
individually for prescription drug coverage in the last three months, including
1.5 million who signed up in the last 30 days.
The new prescription drug benefit is working for Americas seniors because of the
hard work and commitment by
o Pharmacists
o Physicians
o Plan employees
o Public Administrators in the states
o Dr. McClellan and his staff at CMS
o And all the friends and family of Medicare beneficiaries who took the time to
make sure their loved ones took advantage of all of the choices in plans and
enrolled in the plan that best suits their individual needs
I talk with constituents all the time in my district that tell me that before the
implementation of this benefit, they were spending several hundred dollars out their
own pocket on prescription drugs. Many times they were turning over their entire
Social Security check to the pharmacist and still not able to buy all the drugs they
needed to stay healthy.
o These same constituents are now spending less than $100 per month on their
drugs each month thanks to the new Medicare Prescription Drug Benefit.
o They tell me how they now have several hundred dollars a month that they
didnt have before to spend on things other than drugs and that they are now
able to take all the drugs they need without having to borrow money from
credit card companies and family members.
o For many of them, this new benefit has given them their dignity back.
Unfortunately, as is so often the case, the people who voted against this bill find
themselves on the wrong side of history and are now taking advantage of every
opportunity to attack this new benefit by seizing on every little temporary glitch and
exaggerating often isolated problems and making them seem like the norm.
Of course, these partisan attacks and political posturing do nothing to help Americas
seniors.
In fact, rather than holding town hall meetings to educate beneficiaries about the law
and help them pick a plan that best meets their needs, the Democratic Leadership is
instructing their Members to hold town hall meetings blasting the benefit.
How many seniors have they scared away from saving thousands of dollars in drug
costs because of their rhetoric?
How many seniors are having to do without some of the medications they need
because of this rhetoric?

How many seniors are having to go to their family members, swallow their pride, and
ask for money for their drugs because of this rhetoric?
But I want to thank my Democratic colleagues who chose not to go this route and
hurt our senior citizens in exchange for some short-term political gain.
Indeed, many Democrats on this Committee have made the right decision by not
going the Pelosi route but instead chose to help their constituents get the most out of
this wonderful new benefit by holding educational town hall meetings and helping
their seniors enroll in the most appropriate plan for their needs.
o It is my hope that more of your colleagues will follow your lead.
I want to thank our expert panel of witnesses for taking the time to testify before us
today. I look forward to hearing from each of you.

MR. BROWN. Thank you, Mr. Chairman, and welcome, Dr.

McClellan. Nice to see you again. Thank you for joining us. You and I
have spoken about and I appreciate your taking my call a couple of
weeks ago about the frustration, anxieties they try to navigate, as seniors
try to navigate the new drug program. I know you have taken steps to
improve customer service at the request of many on both sides of the
aisle, this panel and others, and I am grateful for that. Insurers like
Anthem in Ohio have been trying to make the best out of a bad situation.
I am equally grateful for that. But no one in the Bush Administration, no
one in the insurance industry has been willing to acknowledge, much less
tackle, the big issues that Medicare Part D has brought. I find that
appalling.
When Democrats talk about the problems dragging this program
down, we are accused of politicizing the issue. That accusation would
carry a lot more weight if we were making a mountain out of a molehill.
Instead, the Bush Administration and the Republicans in Congress are
trying to make a molehill out of a mountain. The problems with this
drug program are real, they are significant, they are ongoing. If someone
doesnt take those problems seriously and it doesnt sound like people in
this institution are, we have no hope of solving them.
First, there is a looming enrollment deadline. How could it possibly
be fair for Medicare beneficiaries to pay a penalty if they dont enroll by
May 15th? How can anyone blame seniors if they have been either too
perplexed or too wary to enter the fray? I spoke to a Medicaid eldercare
lawyer in Butler County, north of Cincinnati, about two months ago who,
about a month and a half ago, who told me, as a Medicaid lawyer, that
she couldnt figure out this benefit for her mother. And why isnt the
Administration working with Congress to extend the enrollment
deadline?
It is pretty clear that that is just the tip of the iceberg. The biggest
problem with the new drug program is the program, itself. Privatizing
prescription drug benefits for seniors never made sense and now it is
wreaking havoc. You know and I know that the problems dogging this

program arent over, they are just beginning. Wait until seniors face
prior authorization requirements, driven not by medical necessity, but by
the bottom line. Wait until formularies change, premiums change,
deductibles change, co-pays change. Wait until drug plans drop out of
the program. Wait until seniors learn their neighbors one county over
have lower premiums. Wait until seniors who pick the best plan for them
on that day need another prescription, one that turns a right plan into the
wrong one. And these are just the coverage problems.
The financial issues are equally daunting. Genentech recently
announced that it plans to charge $100,000 for a years worth of the
cancer drug, Avastin. The company didnt bother to weave a story to the
media about recouping R & D cost, Genentech simply said Avastin will
carve the best and will cost $100,000 because that is what the market will
bear. The Medicare drug law prohibits the Federal government,
amazingly so, we all know this now, prohibits the Federal government
from negotiating drug prices. If Genentech wants to arbitrarily charge
$100,000 so it can generate billions in profits, why should taxpayers
have anything to say about it? Taxpayers contributed $45 million to the
development of this drug. Americans are being charged the highest price
in the world for that drug and Medicare is not allowed to negotiate a
discounted price for that drug. We might as well eliminate the middle
man and give the drug industry a vote in Congress and a Cabinet
position.
Democrats have introduced legislation to eliminate the prohibition
on price negotiations. We have introduced legislation to extend the
penalty-free enrollment deadline. We have introduced legislation to
rationalize prior authorization rules to dispense with mid-year formulary
changes and let seniors switch plans if the initial one turns out to be a
lemon. We have introduced legislation that goes back to the basics to
enable Medicare beneficiaries to bypass private insurance so they dont
spend all their time trying to figure out and compare 40 or 50 insurance
company brochures, instead to simply add Medicare prescription drugs to
their Medicare benefits package and no confusion, no drama, just a good
drug benefit, the way we should have done at the beginning.
Numerous choices have been foisted upon seniors. It is time to give
them the one choice they want. I spent the last six weeks traveling Ohio,
talking to pharmacists and seniors in Vandalia and Cincinnati and Lima
and Bowling Green and Toledo and Akron and Cleveland and Mansfield
and Columbus and Youngstown and one drug store, one pharmacist in
Norton, Ohio, a suburb of Akron, told me that Congress and the
president simply must have handed a blank legal pad to the drug industry
and said hey, write this bill for us, would you? Its never pleasant to
admit you were wrong, but it is worse to ride a dead horse. I hope my

Republican colleagues will decide it is time to focus on the well being of

Medicare beneficiaries and help us make this drug program work. Thank
you, Mr. Chairman.
MR. DEAL. The Chair recognizes the Chairman of the full
committee, Mr. Barton of Texas.
CHAIRMAN BARTON. Thank you, Mr. Chairman, for holding this
hearing. I want to thank Dr. McClellan for once again coming before the
subcommittee. It is always good to see a fellow Texan. I am looking
forward to hearing your perspectives. We also look forward to hearing
the perspectives of the panel that is going to come after you.
Medicare is finally providing patients with prescription drugs after
years of false starts, failed attempts. and endless debate. Congress finally
delivered on its promise and created a Medicare prescription drug
benefit. The result is not perfect. In fact, it is no secret that during those
negotiations and markups several years ago, I unsuccessfully sought to
make several changes when we debated the Medicare Modernization Act
of 2003 in this very room. At the end of the day, however, I voted for
the bill, voted for it in committee, voted for it on the floor, and voted for
it in conference.
We negotiated a compromise that has created what we now call the
program, Medicare Part D. Where our critics before us had failed for 40
years, that Congress and now this Congress has delivered a Medicare
prescription drug benefit for millions of senior citizens. We are now in
the sixtieth day of this new benefit. Although you wouldnt believe it
from some accounts, more than five million seniors have enrolled in the
new Medicare prescription drug benefit plan. Another 20 million are
getting assistance in existing plans that Medicare is helping to subsidize
in some way. That adds up to 25 million seniors, and they are signing up
at the rate of about a half a million a week. That sounds like a success to
me, not a failure.
The people that are signing up are saving money. Their monthly
premiums have dropped from an initial estimate of $37 down to about
$25 a month. CMS reports that the plans they are joining are doing
better than anybody expected to increase the use of generic drugs and to
negotiate deeper discounts with drug manufacturers. The market works.
People are making choices and supplies are responding to market
competition.
This is translated into real savings for Medicare
beneficiaries, meaning that they have been able to reduce their drug
spending by thousands of dollars on an individual basis on an annual
basis.
We are going to hear from some real beneficiaries today, including
one from my Congressional district, Mr. Marcus Hickerson, who I can
see out in the audience over on, unfortunately for me, on the Democratic

side, that he and his wife are there. Marcus is a long time friend, a civic
leader in Waxahachie, and if he says on the record what he has told my
staff in private, he is saving about $2,400 this year because of the new
Medicare prescription drug benefit. These kinds of savings should not
surprise anybody on this committee. Many of us understand that when
we give consumers choices and let free markets and competition work,
prices fall. This is what we saw with Medicare prescription drug cards;
this is what we are beginning to see now with the drug plan, itself.
The critics dont get it. Some of them never will, no matter what the
facts are. It appears that the Democratic leadership in the House of
Representatives has decided that political advantage may be gained by
scaring seniors and discouraging them from enrolling in the new plans.
They have recently sent out packets of information to all House
Democrats arguing that patients are not smart enough to understand the
new benefit. They say the coverage is spotty at best and signing up is not
worth beneficiaries time because it simply cannot save them a dime.
They are wrong. They were wrong when they complained about the
prescription drug card. They were wrong when they said nobody would
offer any plans. They were so very wrong then, and they are just as
wrong now, in my opinion. Of course, we are going to have an honest
debate about that as this hearing progresses.
As I mentioned earlier, the new benefit and its implementation are
hardly perfect. At the same time, I am proud to say that in my
Congressional district, 81,000 seniors have been able to take advantage
of the new plan. That is 81,000 seniors in the Sixth District of Texas
who werent scared off and who certainly were smart enough to figure it
out for themselves. Some may say that my 81,000 constituents have
made a mistake. They may say that my constituents should be confused
and should be disgusted instead of being pleased at saving the money
that they are saving. But I am happy to report that in my district, so far,
the seniors are voting with their wallets and their good sense, they are
ignoring the bad advice and they are signing up.
Now, 81,000 is a good number, but it is not a perfect number. We
can do better. Only about half of my seniors that could sign up have
signed up so far. I hope that every Medicare beneficiary who could save
some money through this new benefit will take the time between now
and the middle of May to look at the program, decide which benefit
program most benefits their particular need and does take the opportunity
to sign up. I am also going to ask that my Democratic colleagues on this
committee really take a look at the plans. Now, there are bound to be
some of the plans that help seniors in their districts. They cant be just
plans that help seniors in Republican districts.

Rather than trying to scare and confuse seniors, I would hope that
we can work together as we go through the implementation phase to find
out what is wrong with the program and if we can make some changes to
fix it, let us do it and let us do it on a bipartisan basis. We owe that to all
of the millions of Medicare beneficiaries. We are going to hold
aggressive oversight over the implementation of this plan. It is too big of
a program and it is too important to too many people not to do that. But
having said that, if it does appear that it is working, let us admit it, you
know, let us not keep beating a dead horse.
I want to thank Chairman Deal for calling this hearing, reiterate my
thanks to all the witnesses. I look forward to the testimony and look
forward to working together to improve this program and implement it in
a fair way to all of our senior citizens. Thank you, Mr. Chairman.
[The prepared statement of Hon. Joe Barton follows:]
PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY
AND COMMERCE
Good afternoon. Welcome, Dr. McClellan and all of our other witnesses. I look
forward to hearing your perspectives on how the new Medicare drug benefit is being
implemented.
Medicare is finally providing patients with prescription drugs. After years of false
starts, failed attempts and endless debates, Congress has finally delivered on its promise
and created a Medicare prescription drug benefit. The result is not perfect in fact, it is
no secret that I unsuccessfully sought to make several changes when we debated the
Medicare Modernization Act in 2003. At the end of the day, however, we negotiated a
bipartisan compromise to create the new Part D program. Where our critics had failed for
40 years, we delivered Medicare coverage of prescription drugs.
As we approach the 60th day of this new benefit, more than 5 million Americans
have decided to enroll in the new Medicare drug plans. You wouldnt know it from
either the news or the critics, but every week, half a million more sign up. Another 20
million people are receiving additional Medicare assistance through employer sponsored
drug plans and other coverage options.
Most importantly, these people are saving money. Their monthly premiums have
already dropped from the initial estimate of $37 down to an average of $25 per month.
CMS reports that the plans they are joining are doing better than anybody expected to
increase the use of generic drugs and negotiate deeper discounts with drug manufacturers.
This translates into real savings for Medicare beneficiaries, meaning that they are able to
reduce their drug spending by thousands of dollars.
We will hear from two Medicare beneficiaries today, including Marcus Hickerson,
who is a constituent of mine from Waxahachie, Texas. Marcus and his wife have
enrolled in new Medicare prescription drug plans, and will save approximately $2,400
this year.
These savings should not come as a surprise to anyone. Many of us understand that
when we give consumers choices, and let free markets and competition work, prices fall.
That is what we saw with Medicare prescription drug cards, and that is what we are
beginning to see now with the new drug plans.
The critics still dont get it, and some never will. It appears that the Democratic
leadership in the House has decided that political advantage may be gained by scaring
seniors and discouraging them from enrolling in the new prescription drug plans. They

9
recently sent out packets of information to all of House Democrats, arguing that patients
are not smart enough to understand the new benefit. They say the coverage is spotty at
best, and signing up is not worth beneficiaries time because it cannot possibly save them
a dime.
These critics are simply wrong. They were wrong when they complained about the
Medicare prescription drug card. They were wrong when they said nobody would offer
any insurance plans. They were so very wrong then and they are similarly wrong now.
As I had mentioned earlier, the new benefit and its implementation are hardly
perfect. At the same time, I am proud that 81,000 people in my district have been able to
take advantage of the new Medicare drug benefit. Thats 81,000 people who werent
scared off and who certainly were smart enough to figure it out. Some say my 81,000
constituents have made a big mistake. They seem to believe my constituents should be
confused and disgusted instead of pleased. But Im happy to report that in my district,
people are voting with their wallets and their good sense, and they ignoring that bad
advice by the tens of thousands.
Now 81,000 is a good number, but we can surely do better. I want every Medicare
beneficiary who stands to save anything through this new program to get the information
they need and the opportunity to sign up.
I am also going to challenge my Democratic colleagues to join the millions of
Americans who expect our priority to be good policy, not good politics. Rather than
trying to scare and confuse seniors in the run-up to the November elections, we should
work together to do everything we can to get seniors the information they need to make
informed choices and to select plans that will save them the most money. At a minimum,
we owe that obligation to all Medicare beneficiaries. I promise everyone here that people
will appreciate our work, and that good policy will make for good politics.
I want to thank Chairman Deal for calling this hearing, and reiterate my thanks to all
the witnesses for coming today. I look forward to their testimony.

MR. DEAL. Thank you. I am going to recognize Mr. Waxman

because he wishes to reserve, to waive his opening statement.
MR. WAXMAN. Mr. Chairman, I know Mr. Dingell is going to go
next, but I have to go to the Rules Committee, so I wont be here for the
opening statement and I just want to ask unanimous consent that my time
be added to the question period.
MR. DEAL. Well, under the rules, you would have an extra three
minutes. I recognize Mr. Dingell at this time, then, for his opening
statement.
MR. DINGELL. Mr. Chairman, I commend you for this hearing and I
want to express my thanks to Mr. Barton, the Chairman of the
committee, as he leaves us because we are deeply appreciative of his
concern for the Democratic members and his invitation to us to
participate in the handling of this legislation. I would say that that is
quite a new experience for us because this thing, this is a piece of
legislation which was conceived in sin, born of the darkness of night
with no participation by the Democratic members at all and attended
only by a fine gaggle of lobbyists for the healthcare industry, particularly
the insurance industry, and for the pharmaceutical industry. No
Democrat will claim parentage of this abomination and whether or not

10

we can save it from the evils that are inherited is beyond my kith, but I
am hopeful that the beginning of this hearing will begin to enable us to
address the faults in it and to perhaps either take steps to repeal it or in an
extraordinary burst of good luck, perhaps to reform it.
Now, having said that, we have sent a letter requesting additional
opportunities to be heard and for an additional hearing under Rule 11. I
am hopeful that our witnesses today will be able to explain some of the
things which are appearing in the papers and I will submit those to them
so that they may make a proper comment. I have told many folks that
this prescription drug benefit called Part D, the D stands for disaster and
most of our senior citizens so view it. While we hear from the Centers
for Medicare and Medicaid Services that things are quieting down, that
doesnt appear to be the case as we read it in the papers. Simply put, Part
D is incredibly complicated with numerous private insurance plan
choices, senior havent got the vaguest idea about how to make the
important choice well and that is which plan is going to best serve their
purposes.
According to the Kaiser Family Foundation poll conducted in
February, 47 percent of the seniors say that they do not have enough
information to understand how the benefit will affect them personally.
This is not surprising, according to a CMS document, beneficiaries have
to go through 17 steps to calculate annual expected drug costs. I would
note that by comparison, there are only 12 steps that the IRS has people
make in Form 1040 EZ. This shows us that much needs to be done here.
For those who have managed to enroll in a private plan, the concern
is whether they are getting what they were promised or if plans are
setting up more obstacles and preventing beneficiaries from getting
needed drugs. Reports from the field, which come in regularly, indicate
that excessive requirements before the plans sign off on whether the drug
are covered is required.
A myriad of different and confusing
mechanisms for filing appeals exist and nobody knows how to appeal,
where to appeal or what to do.
There is use of tiered co-pays to charge patients higher prices for
drugs that are supposedly covered and these problems are not going to go
away. They are part of a vast overhaul that needs to be made on what I
regard as an abominable piece of legislation which does discredit to this
body, not only in its substance, but in how it was conceived and how it
was birthed.
I have introduced legislation which will address some of the
problems associated with it and since I have a minute and 17 seconds, I
am going to just read, for the benefit of the committee, a few clips which
we got from the papers. First, the Washington Post. Stability of
mentally ill shaken by Medicare drug plan problems. And I will ask

11

that this all be put in the record in good time. Then from Newsday, Part
D spells disaster for many citizens. And this is what the article had to
say. A pharmacist for 13 years had this to say. The whole thing is just
mind boggling. Patients are confused. They are ultimately going to get
the short end of the stick. They get confused, frustrated and unruly.
Most of the problem comes from the dual eligibles.
In Medicare, this from the New York Times today, and I would
commend it to the reading of all. It says, In Medicare maze, some find
they are tangled in two drug plans. And it says, Many Medicare
beneficiaries, like Mrs. Beard, tangled in two plans, two hot plans in the
lingo of pharmacists. The situation leaves patients at risk of being
charged two premiums or incorrect co-payments. It also says, It is like
trying to undo spaghetti. I am sure that the Department of HHS will
have some worthwhile comments on their efforts to address this problem.
Last of all, from the Washington Post, again, Maryland urged to
cover funding gaps in Medicare plan. This is something, by the way,
which has been an ongoing problem of the greatest dimensions and it
goes on to say this, A lot of very vulnerable people arent getting their
meds, said Herbert S. Cromwell, Executive Director of Community
Health Behavioral Health of Maryland, which serves children and adults
with mental health problems. This is nothing short of a fiasco. We
have a mess on our hands, it is going to get worse. And when people
start falling into the donut hole, or as I call it, the black hole, we are
going to find out that the popularity of this, which is already very near
the floor, is going to go lower. I wish you all success.
MR. DEAL. The Chair recognizes Mr. Norwood for an opening
statement.
MR. NORWOOD. Thank you very much, Mr. Chairman, and Dr.
McClellan, glad to see you back. I appreciate the strong effort you have
been making on this. Mr. Chairman, I would like to welcome my
constituent Anne Dennison from Hiawasee, Georgia. We are so glad she
is here with us today. She is 72 years young, cancer survivor, and she is
actually going to be here to tell us how Part D has helped her, can you
imagine? There may be some other people who might have been helped
by Part D, too. Anne, we are so happy you are here. I am not going to
mislead anybody. I have concerns about this benefit and Congress will
need to take a long look at it in the future, but isnt that true of all of
Medicare as a whole?
However, Part D is the law and it is actually working. Did it work
perfectly on day one? Heck, no. It surely did not. Do I believe that
some problems could have been prevented? Yes, they could have. I
think so. However, I also think that this benefit will continue to get
better and I have lots of in-the-field reasons to believe that to be true. In

12

truth, many of the problems that were encountered in January were the
result of miscommunication or no communication between CMS and the
insurance plans and the pharmacies regarding dual eligibles. That is
where the basic problem was. These problems have largely, though I am
sure not completely, been worked out.
We need to make sure that every dual eligible is getting the
medications that they need at the appropriate price. We need to make
sure that everyone who overpaid gets repaid, refunded. Now, this was
the governments error and I dont trust the insurance plans to make sure
that wrongful payments are returned. That just comes from a long
history of mistrust. I have talked to pharmacists in my district and the
money they put out to make this program work proves that they have
been the frontline warriors for this plan. They are owed our praise and
thanks, but more importantly, they need their investment back. But the
program is working, premiums are falling, and purchases of medication
abroad which are inherently unsafe have plummeted.
However, it is not all sunshine yet and we will be keeping a very
close eye on these Part D plans, as I am confident Dr. McClellan will,
too. And I dont say that very often about CMS. I say to all insurance
plans, if you think you will alter your formularies to avoid high-cost
drugs, that you will use prior authorizations on every refill to discourage
usage, conclude to drive community pharmacists out or undermine the
competition of the market, this committee is going to be watching. Since
we dont have solid patient protections in these plans, I expect CMS to
work with this committee to be the gatekeeper that seniors deserve and I
believe we are going to need. Mr. Chairman, I truly thank you for
calling this important hearing and I will look forward to the testimony of
all of our witnesses.
MR. DEAL. Thank you. Ms. DeGette is next for an opening
statement.
MS. DEGETTE. Thank you very much, Mr. Chairman. I will waive
my opening statement in favor of extra time for questioning.
MR. DEAL. Ms. Capps is recognized.
MS. CAPPS. Thank you, Mr. Chairman, for holding these hearings.
These hearings cant come soon enough. Since implementation of Part D
prescription program began, I have been hearing pleas for help from my
constituents, including beneficiaries, pharmacists, and State and county
public health officials. Because the Administration seems to be tone deaf
in its praise of this program, I think it might be helpful to give you a
couple of real life stories from my district, because you cant simply
brush off what has happened as minor glitches in the system.
Every day so many real people are suffering. They cant access their
necessary medications and they are dealing with the problems that this

13

creates. Take, for example, the many mentally disabled patients who are
duly eligible. Many of them cant figure out what the different
premiums in co-pays would mean for them. They never could figure that
out. I have heard from my district staff about certain patients who
simply never check their mailboxes. Perhaps they have a diagnosis of
paranoid schizophrenia and therefore, they will never know about the
changes in the system or what new plan they have been assigned to.
When they arrive at the pharmacies, the pharmacist cant figure out what
plans these individuals have been arbitrarily assigned to, either, and it
can take several visits and hours. We have documented many times this
happened, hours of waiting on the phone to speak with representatives
from Medicare and/or the insurance plans, all the while these people are
going without essential medications that protect against dangerous
behavior to themselves or to others.
I have heard from the Santa Barbara County Public Health
Department about a patient who had difficulty getting medication for his
diabetes. The patient actually did know which plan he was assigned to,
but neither he nor his pharmacist could figure out which tier he was in.
By the time he went to the doctor, he had gone two weeks without
medication and had a blood sugar level of 560. The health department
also informed me about an HIV patient who needed a medication that
had always been covered under MediCal, that is Medicaid in California.
His plan, however, would not approve the necessary dosage prescribed
by his doctor. He therefore had to go to the emergency room four times
a week to receive his medication. He could not afford to pay for it out of
pocket, but it was so crucial that he receive this life saving medicine.
Where is the logic in this?
How can we simply tell people that the kinks will be worked out and
that they should just be patient? We have a responsibility to ensure that
our seniors and disabled receive prompt and affordable coverage for their
prescriptions. Instead, beneficiaries on fixed incomes are being forced to
pay co-pays for the very first time ever. While a $3 co-payment may not
sound like much to the people in this room, imagine what it means for
someone living on $800 a month and taking ten medications. Medicare
is supposed to be a lifeline. It provides life saving help and
unfortunately, this new drug plan has failed that test. I look forward to
hearing your explanations and solutions and I close with a statement
from a letter that I just received this last week from a senior, and this is
her statement to me. This is a good way to get rid of the old and the
poor.
MR. DEAL. Mr. Shimkus is recognized for an opening statement.
MR. SHIMKUS. Thank you, Mr. Chairman. Well, I have a few
letters, myself. An e-mail from John Barker, who e-mails us, says, I

14

just called to say that the prescription drug plan I helped my mother
choose is great and has drastically reduced her costs. I got a letter from
Genevieve Hepke--Mr. Barker is from Hamilton County in Illinois, one
of my most rural parts of my district. I represent 30 counties. And now
a letter from a St. Louis suburban area, from Genevieve Hepke from
Edwardsville, Illinois, Just a note to thank you for the informational
meeting on the Medicare prescription drug plan given at the
Edwardsville YMCA today. I have spoken with several representatives
from insurance companies recently and still had only a vague idea of
how to proceed with choosing a plan. The SHIP counselor, which is a
Senior Health Insurance Program individuals, and I want to applaud
them. They have just been wonderful helping our seniors. The SHIP
counselor who explained the program today walked us through from start
to finish with a pleasant presentation and all the information we could
possible need. She was very good. Again, thank you for offering this
program and also the wonderful work you are doing in Washington. You
make us proud. Sincerely, Genevieve Hepke.
And I also want to recognize the local Area Agencies on Aging who
has helped me through probably 12 or 15 Medicare D forums that I have
held. Usually I welcome the seniors. They have all been well attended,
probably anywhere from 60 to 100 seniors at each event. I usually
welcome them, kind of give them the intent of why we passed the
legislation, which is to make sure that poor seniors have access to
prescription drugs. And then I turn it over to more experts than me,
which is usually the folks from the local Area Agencies on Aging or the
SHIP counselors, who, as these letters highlight, have just done a
tremendous job and Mr. Chairman, I just want to take this time to
recognize those folks. We have had, you know, problems and challenges
like everyone else.
I also want to take the remaining 40 seconds that I have to also thank
the local pharmacists. They have struggled and we all know that. But
you know what? Especially in small town rural America, they know
their customers and their concern for them and they have done the
yeomans work and the success of this program really can be tied directly
to the local pharmacists counter in their local stores, and so with that,
Mr. Chairman, I want to thank you. I think the program is going to
continue to be a great success for our seniors in America and I yield back
my time.
MR. DEAL. Gentleman yields back. Mr. Davis is recognized for an
opening statement.
MR. DAVIS. Thank you, Mr. Chairman. I thank you for being here
today, Mr. McClellan. I did not vote for this bill, but the purpose of this
hearing today is to decide how to make this work. I want to say that in

15

my nine years of Congress I have never heard as much outrage expressed

as I have about the prohibition in this bill against the Federal government
negotiating discounts just as Costco, the Veterans Department, or the
Department of Defense would for lower prices on pharmaceuticals to
protect the taxpayer and the Medicare beneficiaries and that is certainly
something that should be addressed here and hopefully in future
hearings.
Perhaps one of the few things that can be agreed upon here today by
you and the Democrats, Republicans are that some people are benefiting
from this, but not enough, and my State, Florida, is one of 27 States that
has had to cover the cost of the dual eligibles to prevent the type of
people like Representative Capps referred to from slipping through the
cracks. My Governor did so only because through March 8 you have
extended the authority of the Federal government to hold the States
harmless so one of the questions I would like to ask you today and I will
be submitting written questions to the record is what are your intentions
as far as extending that deadline beyond March 8 and will you continue
to reimburse States if the problems that existed before March 8 are not
taken care of?
I also can report to you, and I hope you have heard this, as well,
there are many independent community pharmacists who have difficulty
making ends meet that are having to absorb a lot of these costs
themselves and they are running out of the ability to do so. In
Carrabelle, Florida there is one pharmacy who has told us that they are
about to stop handling the Part D benefit entirely unless somebody steps
in to make sure that these HMO plans are covering the expenses as they
are supposed to. One of the questions I would like to ask you is whether
you use the authority this Congress gave you to sanction any insurance
plans that are failing to reasonably and timely reimburse these
pharmacies who are at risk of not continuing to provide the benefit.
I also would like to ask you to address why you are not willing to
support extending the enrollment period beyond May to avoid the
penalty that many of our constituents are going to have to pay because I
think it is fair to say there are still millions of seniors out there who
cannot navigate through this maze of plans. Many people here in
Washington have claimed responsibility for that, but why dont we claim
some further responsibility and extend the enrollment period past May
and not punish the senior who are not responsible for these problems that
were created? So I hope you will be open and you will be honest about
what is happening out there. There are numerous problems and it is our
obligation to address them and there are many lives in the lurch here and
many peoples health is at stake in how we deal with these problems.
Thank you, Mr. Chairman.

16

MR. DEAL. Mr. Buyer is recognized for an opening statement.

MR. BUYER. I tried to pay attention to some of the words that I have
heard here and I suppose I have to put it in context. So isnt it just an
abomination that millions of Americans have access to drugs that they
have never had access to before? An abomination. It is just awful that
people have access to drugs, isnt it? It is just awful that seniors have a
choice in selecting plans that can best be tailored to their physical
characteristics and needs. Choices must be awful in a free society.
Dead horse. The only dead horse I see are advocates of a command
economy. If you want to live in America in a free society and you
believe in liberty, then you believe in a demand economy. You believe
in the marketplace of ideas that give us the greatest drugs and
blockbuster drugs in the world. The quest is for the access of those
drugs. So these ideas that are thrown out there, oh, Steve, let us just have
the VA do the pricing as if what, that hadnt been tried before? In 1990
when Democrats controlled Congress, they said you know, that is exactly
what we are going to do. Those 3.5 million veterans out there that have
access to it, you know, even though they only take 1 percent of the drugs,
yeah, let us give them access to those price controls. Whoa, really.
So we take 41 million Americans, those 41 million Americans make
up 40 percent of the available drugs and you dont think there is going to
be a cost shift out there? When that occurred, there was such panic,
about a thousand percent increase in prices to the veterans, that
immediately Democrats overturned what they had done. So if you want
to keep talking about that, please do a little look back on history on what
Democrat leaders did and their failure and actually their recognition of
their failure. That was a dead horse.
So if you want to continue to talk about these things, the horse,
which I think is being ridden on the other side, is a unicorn because it is
pure fantasy to believe that if you are going to have price controls in
America, that we are going to be the land that will create these
blockbuster drugs that will provide a quality of life to people, not only
here but throughout the world.
Now, Dr. McClellan, you sent a national letter out there and CMS
did requesting a 90-day look back on electronic reconciliation. I want
you to know that these co-pays and deductibles and dual eligibles are still
a concern. Did a quick test on three different sized pharmacies in
Indiana and they are still running about 10 percent. You use the word
requested, I would love to see the word required and I will join with my
colleague with regard about questions on your authority.
I also concur with my colleagues about the pharmacists being real
heroes out there. They are in a pinch, and right now, what I would call it
is, what is required is economic defibulation because--I just made it up.

17

Economic defibulation is their payment schedules are completely out of

whack. They were all used to particular payments from Medicaid and so
what, wholesalers knew when to be paid, manufacturers knew when to
be paid, suppliers knew when to be paid, but right now it is all different.
It has been changed. So I would like for you to work with us. We want
to bring in manufacturers and wholesalers to get it right and the predicate
to do this are the plans because we are going to pay into the plans, the
contracts are in place, enforceable contracts, and then we can get
everybody back on a proper payment schedule. That is what I call
economic defibulation. I yield back.
MR. DEAL. Ms. Baldwin is recognized for an opening statement.
MS. BALDWIN. Thank you, Mr. Chairman. Dr. McClellan and
welcome to the very patient witnesses for our second panel later today.
Many of the concerns that led me to vote against the legislation that
created this drug plan are being born out, but as I cast my no vote at 3:00
a.m. and then waited three more hours during arm twisting as the
majority rounded up the votes they needed to pass this, I really at that
point could never have imagined or predicted the conversations that I
would be having with my constituents since the rollout of this program
began.
It started when thousands of Wisconsins seniors received their 2006
Medicare and You handbook, which included substantive mistakes,
specifically regarding the low-income subsidy, but we were unable to
persuade the Department to send out any sort of errata communication.
Then, over 2,000 Wisconsin seniors were auto-enrolled in plans by
mistake and then, as I met with constituents, seniors, senior advocates,
and pharmacists were confused, as we have heard, overwhelmed and
frustrated.
I happened to be holding listening sessions throughout my district
last year as the rollout was occurring and wherever I went, I was sure to
get several questions; what were you guys thinking when you came up
with this plan? Why did you make it so complicated and why cant it be
like the rest of Medicare? But these were the mild responses. It was not
uncommon for me to spend time one on one with a senior who had just
burst into tears as they explained their experiences with the program and
their anxiety about whether they would find a way to remain on a lifesaving drug.
However, I knew it was really bad when at one of my listening
sessions, I met with the staff of that countys office on aging who had
come over to the listening session location after work to let me know
about their concerns and one of the workers even burst into tears as she
was describing all of the impediments that she had encountered as an
advocate for dual eligible seniors in her county. I know we are here to

18

talk about the implementation of Medicare Part D today and how we can
do better, but I think it is also important to note that there are a number
of issues that cannot be fixed administratively because they are built into
the law that created Part D.
I still believe that the government should be able to bargain for lower
prices, that plans should not be able to change their formularies more
frequently than beneficiaries are able to change their plans and that
beneficiaries who are misled or misinformed should have recourse and
that we must extend enrollment penalty deadline beyond May 15th.
Thank you again, Mr. Chairman. I yield back.
MR. DEAL. Dr. Burgess is recognized for an opening statement.
This is the notice, I think, for the votes at 3:00. No, the vote is at three
oclock. There will be one vote depending on how we are in terms of
opening statements and getting started. It may be that it comes at the
point before your testimony, so we will go ahead if you will proceed with
your opening statement.
MR. BURGESS. Thank you, Mr. Chairman. I have an opening
statement that I will submit for the record, but I have a couple of other
observations. First, I do want to welcome my constituent, Mr. Dennis
Song, to our second panel today. Dennis has been a longtime friend. He
is a pharmacist back in the district and does a great job running an
independent pharmacy. Dennis ran the first 24-hour pharmacy when I
started in practice in Louisville, Texas, and we had many occasions to
talk about things late at night.
And not wishing to just unsolicitously pander to the pharmacists, I
will tell you, Mr. Chairman, that I have heard from a number of
pharmacists in my district, as well, and the pharmacist, Bill New in
Denton, was very kind and would always call me up and say I am going
to put you on hold with the hold music that I am getting from the drug
plan so you will be able to listen to it with me and that was very kind of
him. They played some rather catchy tunes. But I do think that the
problem has ameliorated over the past several years, but Dr. McClellan,
you know my frustration and my anxiety for pharmacists in the district
and throughout the country that make good on the patients needs and
sent them out of the pharmacy with the prescriptions which Secretary
Leavitt told them to do. I think we need to go one step further and assure
the pharmacists that we would do everything we could to make certain
that they werent carrying the entire freight for that.
With the benefit of hindsight, yes, perhaps it wasnt the best idea to
bring the dual eligibles in at the very first of this program. We cant
undo the past, but certainly they can make the argument that we are
having this hearing a month late and perhaps we are, but the reality is the
prescription drug benefit is 40 years late and seniors who signed up for

19

Medicare those first days back in 1965 when they were 65 years of age
are now 106 years of age waiting for that prescription drug benefit, so I
hope it doesnt take us that long to get this right and I dont believe that it
will. And I do believe that fundamentally it is a good plan.
As part of my research in getting ready for this hearing, looking back
over what was proposed in the previous Administration in the year 2000,
March 9 of 2000, in fact, when the President and Senate Democrats were
unified, there was a press release from the White House, the President
and Senate Democrats are unified in a vision for the Medicare
prescription drug benefit and amongst the principles that they have
enumerated here, that it would have to be voluntary; I believe ours is. It
would have to be affordable for beneficiaries of the program. Here is an
interesting one. It has to be administered using private-sector entities
and competitive purchasing techniques.
They go on to say discounts should be achieved through competition,
not regulation or price control. Well, that is probably a pretty good idea
and for once I find myself in agreement with the Clinton Administration.
Mr. Chairman, Chairman Barton of the full committee said we are going
to have aggressive oversight of this program, so I certainly thank you for
holding this hearing today. I am going to take Chairman Barton at his
word. I hope that this is the first of several visits that Dr. McClellan will
have here. We will name that the McClellan Chair in the Energy and
Commerce Committee. It is going to require a lot of work on the part of
this committee to make certain this is done right, but we owe nothing less
to the American people. I yield back.
MR. DEAL. Mr. Pallone is recognized for an opening statement.
MR. PALLONE. Thank you, Mr. Chairman. I am amazed by my
colleagues on the other side attempt to rewrite history is, I guess, the best
I can say. I think the gentleman from Texas should remember that the
Democrats, to the person, I think, every Democrat, voted for a
Democratic substitute to this legislation that would have been very much
like Part B, under Medicare, not privatization, very simple, $25 a month
premium, $100 deductible, 80 percent paid for by the Federal
government, 20 percent co-pay, all drugs included, go to any pharmacy,
all the choice you want and negotiated price reductions, just like the VA
and the military, so when you say what was the Democratic alternative,
we had a Democratic alternative. It was a good alternative and it was
one that would have avoided all the mass confusion that we are living
with now under this Republican bill.
The other thing I wanted to comment, but the comments that the
gentleman from Indiana made, I think that his problem is that he is
looking at this strictly from an ideological point of view. I dont think he
is here now, but I have to comment. He talked about command and

20

control. Do you think that when I have my town meeting in Edison that
my senior citizens--I had a town meeting in Edison last week, we had
about 150 seniors--do you think that they care about command or control
or that they see, you know, Medicare Big Brother swooping down on
them and telling them what to do with their drugs? I mean, they are not
looking at it that way. They are just looking to survive. You know, he
talked about choice. They dont think they have any choice because now
they are being limited in what drugs they can choose, what pharmacy
they can go to. That is not choice.
I mean, the first thing that I was told by the seniors at my forum, they
wanted to know why there were not negotiated prices, why the
government wasnt doing what we do with the VA and the military to
keep the prices down and I had to say look, the only reason I can think of
is because this bill was written by the pharmaceutical and the insurance
industry and it wasnt written for you because the President wasnt
concerned about how this was going to work out for you. I want to be
honest with you. All I get from my seniors is mass confusion. They just
want a simple program, they are very comfortable with Medicare, you
know, the way it is traditionally. They would have been very happy if
we just expanded the Medicare program to include a prescription drug
benefit and I want, in the time I have left, I just want to commend Mr.
Dingell for this letter that he wrote asking for more oversight because I
think it is absolutely necessary.
Several of the Republicans talked about the problems at the
pharmacies. I went to a pharmacy in my district last week or two weeks
ago and again, mass confusion. Pharmacists are shelling out all kinds of
their own money because they dont want to turn people away. We need
an oversight hearing on the pharmacy issue, we need an oversight
hearing on the States and how they are going to be reimbursed and what
they are going to do. I mean, I do appreciate the fact that some of my
Republican colleagues said that we are going to take our oversight
responsibility seriously and that should be to respond to our letter and
have several more hearings on various aspects of this because I am not
going to call it names. It is just mass confusion. That is what it is. It is
very simple. And anybody who tells me that there is not tremendous
confusion out there, I think is just kidding themselves. Thank you, Mr.
Chairman.
MR. DEAL. Mr. Pitts is recognized for an opening statement.
MR. PITTS. Thank you, Mr. Chairman. I will submit my opening
statement for the record.
[The prepared statement of Hon. Joseph R. Pitts follows:]

21
PREPARED STATEMENT OF THE HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF PENNSYLVANIA

Chairman Deal, I would like to thank you for convening this hearing today on such
an important issue.
In my district in Pennsylvania, there are 101,576 Medicare beneficiaries eligible to
enroll in Medicare Part D. As of February 11, 46,481, or 46%, of them have chosen
to do so.
According to CMS, only 65% of those eligible in my district are expected to enroll
in Part D this year. Yet, the average expected enrollment across all of Pennsylvania
is 72.5%. The estimated 2006 enrollment for the districts of three Members of my
delegation is 95% or higher.
I am concerned with the 35% of Medicare beneficiaries in the 16th district who are
not expected to enroll in the program, and it is my hope that our witnesses today
will shed some light on why so many of our seniors are choosing not to participate
and how we can encourage them to do so.
Those already enrolled in Part D and the pharmacists who serve them have faced
difficulties and confusion in the opening days of the program
o seniors who did not know that they had already been enrolled in plans,
o dual eligibles hit with co-payments larger than they expected,
o pharmacists dispensing drugs without knowing if the plans or the state
would reimburse them.
I am pleased that many of these problems have been resolved; however, the
program still faces many more, which we will address today.
Mr. Chairman, I welcome the opportunity today to hear testimony from Dr.
McClellan and the rest of the witnesses.
I yield back my time.

MR. DEAL. Mr. Bilirakis.

MR. BILIRAKIS. Thank you, Mr. Chairman. Yes, we should have
more oversight and yes, we should have more hearings, but I should
think when we have those hearings, just as the hearing today should be,
we should be open minded; we should be here to realize that we are
trying to learn. This is an educational process. But when we come into a
hearing, Mr. Chairman, as some have and they refer to certain
newspapers and whatnot, and that is their means of education, that is the
way that they see the program, I just wonder how open minded we really
are.
There is a recent issue of the AARP magazine with multiple pages
on the plan. It just lays it out with illustrations and whatnot. It does a
very good job and it encourages the seniors to not just randomly
basically not take the plan and not consider the plan, but take into
consideration many things, such as particularly the catastrophic portion
of it all because you may not have much of an illness today and you
dont have much of a need for drugs today, but no one knows what the
future holds. That should be, that is part of education, too. But if we
were going to be depending on what we read in the newspapers, I am
here to tell you that Medicare would have never gotten off the ground.

22

Take a look at those same newspapers back in the mid-60s and what
they said about Medicare, about all the complexities, and all the
problems that people were having. People were not signing up for it and
that sort of thing and if we had taken all that, not we, but those who were
here at that time, if they had basically said we are going to discard it
because the newspapers say hey, there are an awful lot of problems and it
is no good, then we would not have Medicare today. So Mr. Chairman,
we are just not open minded, and we talk about wanting to have hearings,
well, it is just another opportunity to get up here in a very partisan and
biased manner, just express our point of view, not on a basis of
education, and what we are really learning.
I spent some time in a pharmacy in my district last week and I went
into the back where the pharmacists are and I talked with them and I
listened when they talked to patients, so I went up with them and talked
to the patients and that sort of thing and you know, it is not perfect. I
didnt hear a single patient who complained about the plan on that
particular day. I am sure I could pick another day and there would be a
patient or two who might complain about the plan or may have questions
that possibly the pharmacist cannot answer, but that is the way, I think,
that we learn. That is the way we learn. I dont think we learn just by
picking up the newspapers or coming up here, shutting our ears to any of
the testimony.
We have pharmacists here today. We have patients here today and
hopefully we will open up our ears and listen to them. And there are
problems and people have expressed some of those problems. There is
no question about it and we are going to have to do some molding and
remolding as time goes on, but this is basically what we have done with
Medicare, too, and so hopefully, Mr. Chairman, we can all work together
if we really want to, rather than continue to throw stones at each other
and I think we are going to have a plan that we will be proud of in the
future. Thank you, Mr. Chairman.
MR. DEAL. Thank the gentleman. We are getting close to the time
the vote is going to take place. We are going to continue with opening
statements and we will rotate someone in the chair so that we can
hopefully get through these during this vote. It is only one vote. So if
you have made your opening statement, you may want to leave and go
vote early and come back. We are going to be rotating. Mr. Strickland,
you are next.
MR. STRICKLAND. Thank you, Mr. Chairman, and I will be very
brief. I have listened to the comments of my colleagues on both sides of
the aisle. I think Mr. Pallone was absolutely correct. Seniors are
confused, many of them are frightened. They dont know what to do.
Pharmacists are upset. We are listening to our constituents, that is who

23

we are listening to. We are listening to the people in our districts and the
newspapers, I think, are reflecting what they are hearing from the
citizens across this country. I think the greatest example of the utter
failure of this plan is the fact that when the President of the United States
gave his State of the Union Address, this which was supposed to be one
of the two or three most valued accomplishments of his presidency so far
was not mentioned, not one word, and the reason it wasnt mentioned is
that he knows, and we all know, that this is a deeply flawed, perhaps
fatally flawed program. It is going to have to be changed dramatically.
I would like to see it repealed and we start all over and do what we
should have done and that is add a benefit that is a part of Medicare, that
is a part of Medicare easily understood, easily financed, that does
provide choice to our seniors. Our seniors have lost choice with this plan
and they are angry and that is why the President of the United States,
giving his State of the Union Address failed to even mention that this
body had passed this, what was supposed to be a very successful,
meaningful domestic policy. So with those comments, I look forward to
the testimony that is going to be given to us today and I yield back the
remainder of my time.
MR. DEAL. Thank you. Mr. Pickering is recognized for an opening
statement.
MR. PICKERING. Mr. Chairman, thank you very much for having
this hearing. To Dr. McClellan, I want to thank you for your leadership.
I know that this is not the easiest time between dealing with irritable
Members from the Katrina region and trying to implement a major,
major change in Medicare Part D. We appreciate your commitment to
solving the problems and making things work and correcting things as
they are brought to your attention. I look forward to your testimony and
I look forward to working together with you, whether it is from our
region or for those who are now eligible for Medicare Part D, to get the
best plan for them at the best price. So thank you for your leadership.
MR. DEAL. Thank the gentleman. Mr. Rush.
MR. RUSH. Thank you, Mr. Chairman, and I appreciate you holding
this hearing, also. And I also want to welcome Dr. McClellan again.
Mr. Chairman, it has been demonstrated in this hearing so far, there are
vast differences of opinion regarding both the enrollment and the
effectiveness of the Medicare Part D program that was enacted into law.
Mr. Chairman, two weeks ago we sat in this same room and we heard the
Secretary of Health and Human Services, Michael Leavitt, tell the full
committee that our seniors were becoming excited about the new Part D
benefit and that they were starting to enroll in the new program in
increasing numbers.

24

The Secretarys contention was that seniors were really starting to

understand how the new system worked, that they were beginning to
enthusiastically support the new program. As the Secretary was making
these comments, I was astounded. I thought to myself who is he talking
about? Who are these seniors? Who are these beneficiaries and where
are they? Certainly, the experience in my district does not bear out his
comments; it is vastly different in my district. Mr. Chairman, I am
telling you and other members of the committee that my seniors are
completely confused, they are frustrated, they are confounded and they
are fighting mad with this new Medicare Part D benefit program.
Mr. Chairman, the numbers that the Secretary espoused bear the fact
out that this is a confused state that our seniors find themselves in. Only
4.9 million seniors who are eligible have actually signed up for this
Medicare Part D drug coverage. Just last week I held yet another
seminar in my district on the south side of Chicago to help my
constituents navigate the complicated maze of private insurance carriers
and their various benefit packages, the second one, and we plan to
conduct more. I found that my constituents are completely confused.
They do not understand the basic elements of the new program.
I am particularly worried about the senior citizens and those seniors
who may be immobile or who have lost some of their mental capacity.
Who is helping these folks? We need to do a better job and as such, Mr.
Chairman, I am pleased that we are having this hearing. I want to close
by suggesting that members of this committee seriously consider
legislation that would extend the May 15 deadline for enrolling in the
program and make other reforms that simplify the new benefit program.
We are not meeting our goals. We are not meeting our objectives. We
are really not meeting the interests of the American people, particularly
the elderly and those who depend on Medicare for their basic healthcare
coverage. With that, Mr. Chairman, I yield back the balance of my time.
MR. DEAL. Mr. Hall is recognized for an opening statement.
MR. HALL. Mr. Chairman, would it be too much if I asked for a
second reading of all the speeches that have been made here?
MR. DEAL. It would be too much.
MR. HALL. I will yield my time back and I will ask unanimous
consent to put a statement in the record.
MR. DEAL. Without objection. Ms. Eshoo.
MS. ESHOO. Thank you, Mr. Chairman, for having this hearing and I
hope that there will be a commitment of the leadership of the committee
to hold more in terms of oversight because I think it is a must. It is good
to see you, Mark. I dont know how glad you are to be here, but I have a
printed statement for the record and I just want to say the following. I
have the privilege of representing an incredibly distinguished

25

Congressional district, you know that. You were a part of it at one time
and I think there are more Ph.D.s in my Congressional district than any
other place in the country, so people are very sophisticated. They dont
really identify with a solid Democratic answer or a solid Republican
answer. You give them the information; they will make up their own
minds.
Their report back to me is that this is a real Rube Goldberg plan. I
didnt think that it was sound public policy when it was presented, but I
weighed in. I didnt vote for it. What we are doing here today is really
reacting to what the reception in the country has been of the plan now
that it is the public policy of the United States of America. So we are
going to have to, I think, first of all, to be honest about it and what the
problems are. It is confusing, it is enormously complex. Pharmacists in
my area, Mark, are not happy. They are pulling money out of their own
pockets to help people. The whole issue of the card that people got to
begin with, I think should have been instructive to CMS because what
problems were experienced then have now been passed over to the
system, so I am going to direct my questions to you about what you plan
to do to fix some of these things.
I think some things are not repairable because the legislation, I think,
represents flawed public policy, but there are some things that we can do
and I want to know, in my questions, what you support, what you dont
and of course, I will listen to your testimony, as well. I think this could
have been done much better. I think it could have been much clearer. I
think it could have been far less complex and I might say if it was less
ideological we might not be experiencing the problems that we are now,
so but as I say to my constituents, I will do everything I can to try and
fix and repair something that you are having to live with. They are not
happy, they are not pleased and I think that this has given choice a really
bad name and that is what my constituents say and as you know, Mark,
they are quite sophisticated. So I am going to go and vote and then come
back and ask you some questions. Thank you, Mr. Chairman.
MR. DEAL. Mr. Allen.
MR. ALLEN. Thank you, Mr. Chairman. I appreciate your calling
this particular hearing to examine the current status of the Medicare Part
D program. Speaking for my constituents in Maine, I have to say that the
process has been chaotic. The Medicare Modernization Act of 2003
gave the pharmaceutical industry and the insurance industry most of
what they wanted, but it denied senior citizens and people with
disabilities the simple option of adding a Medicare administered
prescription drug plan to their Medicare benefits. Instead, this law forces
beneficiaries to sort through the ever changing array of plans, premiums,

26

co-payments and formularies offered by dozens of private insurance

companies in each State.
Because Medicare is prohibited from negotiating price discounts, the
drug benefit will never provide beneficiaries with a reliable and
affordable access to prescription drugs. The gentleman from Indiana was
talking about the problem of having price controls in America. Well,
what we are talking about is good enough for the VA, it is good enough
for Medicaid, it is good enough for military retirees. If those are price
controls, I would say people under Medicare should have the benefit of
them.
Maine is fortunate that we had a Governor that was committed to
ensuring access to prescription drug coverage to all Medicare
beneficiaries and that meant assuming a very hefty financial burden
without a guarantee of full Federal reimbursement. We had such chaos
in this transition period. Maine has now spent $6 million of its own
money to ensure that low-income beneficiaries have access to the
prescription drugs because the plans werent working, CMS wasnt
coming through the way we needed it.
I want to say that a lot of this has to do with the dual eligibles and
back in March or April of last year, Senator Rockefeller and I introduced
legislation that would have extended the period for the transition for dual
eligibles from essentially six to 10 or 12 weeks, whatever it was, to six
months and we were assured over and over again by CMS that it is no
problem, it is going well, we wont have an issue here.
I do want to welcome Jude Walsh today. She is the director of
pharmacy assistance in Maine. She is here to share her thoughts on
managing the Part D program from the States perspective, particularly
this challenge of handling the dual eligibles, moving them from
Medicaid to new private plans. And then lastly, I would just say this, no
amount of public relations spin can cover up the frustration Americans
have experienced during the two months of implementation of Medicare
Part D and I agree with Mr. Strickland. If this plan is so good, the
President, when he had a national television audience during the State of
the Union speech, would have mentioned it at least once. We need a
better plan, we can work toward a better plan and I do think this hearing
is a start toward gathering the information we need and with that, Mr.
Chairman, I yield back.
[Additional statements submitted for the record follow:]
PREPARED STATEMENT OF THE HON. ED. TOWNS, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF NEW YORK
WHILE I UNDERSTAND THAT THE CENTERS FOR MEDICARE &
MEDICAID SERVICES (CMS) HAVE BEEN WORKING DILIGENTLY, THE

27
MEDICARE PART D PRESCRIPTION DRUG BENEFIT PROGRAM HAS BEEN
PLAGUED WITH PROBLEMS AT EVERY LEVEL SINCE ITS IMPLEMENTATION.
SINCE THE PROGRAM WENT INTO EFFECT, CONGRESSIONAL OFFICES
HAVE BEEN FLOODED WITH CALLS ABOUT THE PROBLEMS THAT
BENEFICIARIES ARE HAVING ACCESSING VITAL MEDICATIONS.
FIRST OF ALL, MANY BENEFICIARIES ARE CONFUSED ABOUT
WHETHER OR NOT THEY SHOULD ENROLL IN PART D. ADDITIONALLY,
MANY ARE FRUSTRATED BY THE CHOICES OF PLANS AND CONFUSED
ABOUT PICKING THE PLAN MOST SUITED TO THEIR NEEDS.
YET THE PROBLEMS HAVE NOT STOPPED THERE.
MEDICARE
BENEFICIARIES WHO THOUGHT THEY WERE ENROLLED IN PART D PLANS
ROUNTINELY ARRIVE AT PHARMACIES TO DISCOVER NO RECORD OF
THEIR PLANS. LOW-INCOME MEDICARE BENEFICIARIES ARE BEING ASKED
TO PAY HUNDREDS OF DOLLARS FOR THEIR MEDICATIONS BECAUSE
THEIR PART D INSURANCE PLANS HAVE NOT BEEN UPDATED WHEN
ENROLLEES QUALIFY FOR LOW-INCOME SUBSIDIES.
DUAL-ELIGIBLE BENEFICIARIES ARE DENIED COVERAGE FOR
NECESSARY MEDICATIONS WHEN THE PLAN, INTO WHICH THEY HAVE
BEEN
AUTOMATICALLY
ENROLLED,
DOESNT
INCLUDE
THEIR
MEDICATION ON ITS FORMULARY. THIS IS REGARDLESS OF THE FACT
THAT CMS HAS ASKED ALL PLANS TO PROVIDE A 30-DAY SUPPLY OF NONFORMULARY DRUGS TO NEW ENROLLEES.
PHARMACISTS ARE BEING FORCED TO SPEND HOURS ON HOLD WITH
MEDICARE AND PRESCRIPTION DRUG INSURANCE PLANS SIMPLY TO
VERIFY BENEFICIARY ELIGIBILITY.
CLEARLY THE DISCONTINUITY OF HEALTH SERVICES EXPERIENCED
BY MEDICARE BENEFICIARIES IS INEXCUSABLE. UNFORTUNATELY, THE
PROGRAM STILL IS NOT MEASURING UP AND BENEFICIARIES IN MY
DISTRICT AND THROUGHOUT THE NATION ARE BEING NEGATIVELY
IMPACTED. AS MEMBERS OF CONGRESS, WE ARE ENTRUSTED WITH THE
RESPONSIBILITY OF PROTECTING THE NATIONS HEALTH.
IT IS
IMPERATIVE THAT CONGRESS MAKES IT CLEAR TO AFFECTED PARTIES
AND BENEFICIARY GROUPS THAT WE ARE AWARE OF THE PROBLEMS
WITH THE RECENTLY IMPLEMENTED PROGRAM AND DO NOT VIEW PART D
AS A SUCCESS.
ADDITIONALLY, I CHARGE CONGRESS TO CONTINUE TO HOLD THE
CENTERS FOR MEDICARE & MEDICAID SERVICES ACCOUNTABLE AND
FORCE CMS TO MAKE THE NECESSARY CHANGES TO ENSURE THAT
BENEFICIARIES ARE ABLE TO ACCESS LIFE-SUSTAINING MEDICATIONS.
THANK YOU MR. CHAIRMAN.
PREPARED STATEMENT OF THE HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
The implementation of the Medicare prescription drug program has been difficult
and disappointing. It has been filled with confusion and disruption. It has caused anxiety
and serious problems for people trying to get their medicines.
January 1 should have been a red letter day for Americas seniors and persons with
disabilities. That should have been the day when they finally got simple and dependable
coverage of their prescription drugs as a regular part of Medicare. Their Medicare card
should have been enough to give them access to their drugs in any pharmacy in America.
Instead, the benefit came in the form of coverage through hundreds of private plans,
each different in coverage and conditions, each different in cost and the price of drugs

28
covered. The choices were dizzying and difficult. People spent hours trying to decipher
the variables in the plans, made a choice, and then found the information changed the
next time they looked.
And that was just the beginning. When people tried to go in and get their drugs,
they found their eligibility couldnt be established, or their drugs werent covered. The
people who had been covered under Medicaid and who were switched summarily on
January 1 were the worst off. But they werent the only ones with problems.
All of these difficulties in implementation were the result of a combination of
problems: a flawed design for the benefit, a failure to anticipate implementation
problems, and too big a job for too little staff.
Certainly, there are people who werent covered before who are pleased to have the
new benefit. We will hear from some today. And certainly we all welcome success
stories, and we want this benefit to work. But the fact is, for too many seniors and
persons with disabilities, it has not worked; it has been a disaster. This is clearly
unacceptable. Trying to gloss over the situation by claiming all is well, as this
Administration seems to want to do, is a disservice to all those people who continue to
have serious problems getting coverage.
Further, I fear this is just the beginning. We know plans can change their
formularies after people have enrolled. We know they can raise their pricesthat has
already occurred. That affects what people pay in coinsurance and in the period when
there is a gap in coveragethe so-called donut hole. Again, for people who picked their
plans because of the coverage of a certain drug or its price, to pull the rug out from under
them and change things is just plain wrong.
We know that the success in enrolling subsidy-eligible low-income people has been
abysmal. We all know they are the most certain to benefit from this program, and yet we
are not reaching them. One major reason for this is the complications caused by the
assets test. We should fix that. Yet we have no proposal to do this from the
Administration.
We know that with all this confusion and problems, it is folly to hold a threat over
seniors in the form of a financial penalty if they dont enroll by May 15. And yet the
Administration refuses to support such a legislative change.
In the end, we need the option of a simple Medicare benefit. That should be the first
choice available to all beneficiaries. It should work like other Medicare benefits. It
should be the beneficiarys choice if they want to select an alternative to traditional
Medicare. And we should use the purchasing power of Medicares beneficiaries to get
better prices from the drug companies.
This should not be about protecting drug company and insurance company profits,
but about getting the best price and the best coverage for Americas seniors.

MR. BILIRAKIS. [Presiding] Well, we dont know how many will be

returning so that being the case, I hate to be the only one listening to your
testimony. I am going to wait about maybe two minutes, if I may, with
your indulgence.
[Recess]
MR. BILIRAKIS. Into our seats, please. From here we spend a lot of
time together these days, actually over the years. Going all the way back
to the days when we were the minority, I believe. Dr. McClellan makes
up the first panel. He is the Administrator, as we know, of CMS. Sir,
you have 10 minutes. Please proceed.

29

STATEMENT
OF
HON.
MARK
ADMINISTRATOR, CENTERS FOR
MEDICAID SERVICES

MCCLELLAN,
MEDICARE &

DR. MCCLELLAN. Okay. Thank you, Mr. Chairman. It is a pleasure

to be here to update you on the implementation of the new Medicare
prescription drug benefit and I want to particularly thank you for sitting
here and listening to my opening statement. I appreciate it. As a result
of extensive-MR. BILIRAKIS. Somebody has to do it.
DR. MCCLELLAN. Somebody has got to do it, that is right. As a
result of extensive outreach efforts, enrollment is off to a strong start in
the prescription drug benefit.
More than 25 million Medicare
beneficiaries now are receiving prescription drug coverage and we
particularly applaud the pharmacists for their tremendous help with this
new benefit. The number of Medicare beneficiaries continues to grow at
the rate of hundreds of thousands of new enrollees in the prescription
drug benefit each week. Over 5.5 million people have enrolled
individually in prescription drug plans. The vast majority of the new
enrollees in these stand-alone prescription plans have chosen plans
offering something other than the standard drug benefit designed by
Congress.
Many beneficiaries have chosen coverage with low or no deductible,
with fixed co-payments instead of co-insurance; it is very predictable,
and coverage in the coverage gap, as well as other additional benefits
made possible by the choices available. Because of strong competition
among the drug plans, the Medicare prescription drug coverage is costing
much less than expected. Premiums are one-third lower on average and
seniors are saving about $1,100 on average on their annual prescription
drug cost.
A new CMS analysis demonstrates that Medicare
beneficiaries with common chronic conditions can save a substantial
amount on their drug bills by enrolling in a drug plan compared to what
they would pay without this coverage.
For example, people with Medicare who select the lowest cost plan
in their area can save an average of 57 percent on their drug costs with
savings available because of lower prices, including prices that are
usually significantly lower than the Medicaid prices negotiated by
government. Savings increase to 70 percent or more when beneficiaries
use generic versions of their drugs, drugs that have the same active
ingredient and work in exactly the same way. Savings can be over 80
percent or more when they switch to drugs in the same class that work in
a similar way to the drug they are taking now, as Consumers Union and
many other consumer groups have recommended.

30

The analysis also demonstrates that a range of plans available to

beneficiaries can provide large savings, as well. In other words,
beneficiaries can get substantial savings just by focusing in on the
specific kind of drug plan that they want. Taxpayers and States are
saving, as well. Since last July, the projected cost of the drug benefit has
dropped by $30 billion over the next five years. States will spend $37
billion less than projected over the next 10 years and we recently
announced $700 million in additional State savings this year alone. In
fact, the total spending on prescription drugs in this country is now
projected to be significantly lower because of the drug benefit, even as
seniors are getting millions more prescriptions filled at a much lower
cost.
Many beneficiaries with limited incomes and resources can save
even more; 95 percent of the cost of their prescription drugs on average
by applying for the low-income subsidy. You will hear more about that
from someone who is taking advantage of the subsidy on the next panel.
To identify and enroll beneficiaries who can qualify for this extra help,
CMS has entered into a new agreement with the National Council on
Aging. Through this agreement the NCOA will refine lists of
beneficiaries to improve the ability to target outreach and enrollment.
NCOA is also reviewing alternative strategies to supplement and
improve the ongoing and future outreach efforts for low-income subsidy
beneficiaries.
Now, while the vast majority of beneficiaries are using their
prescription drug coverage effectively and while plans are filling
millions of prescriptions each day, some people who enrolled or
switched plans late in the month, especially dual eligible beneficiaries,
have had problems when filling their prescriptions the next month. The
information systems didnt have time to sufficiently reflect these
changes. To make people aware of how they can avoid these problems,
we have undertaken an education campaign. We are encouraging people
to enroll early in the month to get coverage the next month. We have
updated our online enrollment center messages. We have modified the
scripts that our call centers use when people call us at 1-800MEDICARE and we are working with pharmacists, States, and advocacy
organizations to convey this important information.
We are working to prevent any such problems with switching plans
and late enrollment in the future and we dont want anyone with
Medicare to leave the pharmacy without the prescriptions they need.
Almost everyone who joins or changes plans before the 15th of each
month, when they sign up on their own, will get their prescriptions filled
quickly and conveniently the next month. This allows Medicare and the
plans time to update systems and plans time to mail important documents

31

like proof of enrollment and a membership card before the coverage

begins.
Due to the difficulties that some dual eligible and other low-income
beneficiaries face, States, in many cases, have activated their State
payment systems to ensure that people receive their medicines. Through
a temporary demonstration program, Medicare is reimbursing States for
supporting the transition of dual eligible beneficiaries to their Medicare
drug coverage. We will reconcile drug payments with the prescription
drug plans and pay any differential between the drug plan reimbursement
and Medicaid costs because in many cases the Medicaid program is
paying higher prices than the new competitive drug plans. We will also
pay for State administrative costs.
States are widely participating in this program. Of the States that are
participating, the vast majority either did not activate their State payment
system and are seeking only reimbursement for administrative expenses,
or they have a very low rate of using their State claim systems. Most
States are using their State billing system for only a small share of
prescription drug claims, averaging one prescription or less per pharmacy
each day. In Florida, during the time of this reimbursement program,
fewer than a hundred prescriptions have been filled through the State
system, for example. Most States are working closely with us, using our
backup systems and caseworkers, if needed, to make sure that all
beneficiaries are getting the drugs they need and in the vast majority of
cases, avoiding the need for State billing.
As we continue the implementation of this new program, we are
learning from our past experiences. We will apply these lessons in the
future in the guidance we provide to the plans, physicians, pharmacists,
and our other partners. I want to thank you again for this opportunity to
discuss our progress during the first two months of the most important
new benefit in Medicare in 40 years, the new and overdue prescription
drug coverage. While we are pleased that millions of Medicare
beneficiaries are getting their coverage used effectively every day,
getting prescriptions filled every day, we are going to continue working
to ensure that everyone with Medicare can use this coverage smoothly
and effectively. I am happy to answer any questions that you all may
have.
[The prepared statement of Hon. Mark McClellan follows:]

32
PREPARED STATEMENT OF THE HON. MARK MCCLELLAN, ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES

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MR. DEAL. Thank you. Let me, first of all, start with the New York
Times article that was alluded to by Mr. Dingell and several of us have
seen, and that is with regard to people who may have been enrolled in

68

two plans and whether or not they are going to be charged the premiums
out of their Social Security for two plans. What precautions have you
taken and what are your plans to be able to unravel that particular
problem?
DR. MCCLELLAN. Mr. Chairman, in the first two months of the
program, about 800,000 people with Medicare have switched plans in an
effort to get into the plan that best meets their needs. The vast majority
of these people are dual eligible beneficiaries with Medicare and
Medicaid. A large number of these beneficiaries are using their new plan
effectively, but some of them do have coverage that is active from both
plans. We have been careful about turning off the payments from the old
plan, the original plan, because we want to make sure that these
beneficiaries get the drugs that they need at the pharmacy.
Sometimes these switches have been done by States acting on behalf
of their beneficiaries and the beneficiaries may not know about it. The
switches may occur late in the month and a beneficiary might show up at
the pharmacy early in the next month and the information may not have
fully caught up, so we want to make sure that the beneficiary does have
coverage when they go to the pharmacy and we are conducting
reconciliation between these plans in order to make sure that the
payments work out appropriately.
We are encouraging beneficiaries to enroll earlier in the month, as I
just said, to prevent this kind of problem from happening and when they
do, they will be able to use their new plan smoothly. Now, because the
vast majority of the people who are in this situation are dual eligible
beneficiaries, they dont have any Medicare premium to pay, so they are
not going to be billed by Social Security for any double premium. They
wont be billed for any premium at all. To make sure that the
information on eligibility for extra help goes to the new plan, as well as
the old plan, in a timely way, so beneficiaries are charged the right copayment, we not only send out this information when the enrollment
comes in from the new plan, we also have sent out a number of special
files that the plans can use to make sure their co-payment information is
up to date. As a result of these kinds of steps, we have seen far fewer
cases of problems with co-pays for these individuals or a problem with
premiums and the like.
So we have seen a large number of people switch plans. For many of
them, the new plan is the plan that is active and is working just fine. We
want to make sure that nobody leaves the pharmacy without their
prescription and so we are reconciling the payments for these plans and
we will finish working on these issues in the next few weeks.
MR. DEAL. One of the concerns that you heard voiced by several of
the panel already is, and I think it is a misconception, and that is the

69

ability of a plan to change its pharmaceutical list of covered

pharmaceuticals. You and I have had a conversation about that. Would
you walk through the process whereby if a plan wants to change their
formulary, what they would have to do and would you also talk about
why that might be a very good thing to have happen?
DR. MCCLELLAN. Sure. As a background, we review the
formularies that plans start with to make sure that they meet the
requirement that beneficiaries are going to be able to get access to the
drugs they need. The formularies used by the Medicare drug plans are
broader than the VA formulary and broader than many Medicaid
preferred drug lists to make sure that people can get access to the
medicines that they need. In order to change a drug on a formulary, the
plan must first go through what is called a P&T Committee; this is a
committee of experts that review, including independent experts, that
review whether the change in the formulary is medically appropriate, and
that happens before it even gets to us.
When it comes to us, we go through the same kind of process that
happens when we approve the formulary in the first place and make sure
that the drug coverage is broad, and that people will be able to get access
to medically necessary treatments. Even after we give our approval, the
plan must go through a period of notifying beneficiaries with at least a 60
day advance notice, before it takes effect. Now, with all these kinds of
steps, it probably wont surprise you to hear that we have had no requests
from plans to change their formularies since the drug benefit formularies
were announced last fall.
MR. DEAL. We are going to hear from the representative that
Representative Allen alluded to from his State of Maine in the next panel
with regard to problems that they may have encountered. Is Maine one
of those States that is a model State for purposes of the plan you
previously alluded to and is Maine one of those States that waited toward
the very end of the year to make a transfer of their dual eligibles and if
so, was that part of the problem there?
DR. MCCLELLAN. Well, we have been trying to work very hard with
the State of Maine and other States that have been at the higher end of
using their State systems. Like I said before, the vast majority of States
either arent using any State billing at all, or they are using it for only a
very limited number of claims, including fewer than a hundred for the
whole State of Florida, and a few thousand for the State of Pennsylvania
for all of their low-income beneficiaries. Now, Maine did switch some
people in plans late in December and there are still some issues with the
data coming in from Maine. For example, we have heard from a number
of nursing home chains and others that they are not getting the right
information on beneficiary location for their dual eligibles. There is a

70

different co-pay for beneficiaries who are in nursing homes. They dont
pay any co-pay at all and we will rely primarily on information from the
State for where those dual eligible beneficiaries are located.
We are going to keep working closely with the State and you will
hear from the State later today. They are working very hard on this with
us. I can tell you that the number of claims that Maine is submitting to
us through their State system has gone way down from what they were in
January and we have sent some special data teams to Maine to help work
out these issues, as well, and we are going to keep working closely with
them until they get resolved.
MR. DEAL. Ms. DeGette.
MS. DEGETTE. Mr. Chairman, I will defer to one of my colleagues.
I need a minute to get ready.
MR. DEAL. Ms. Capps will be next.
MS. CAPPS. I thank you, Mr. Chairman. Dr. McClellan, again, thank
you. I want to touch briefly on a lot of topics, but I want to tell you
about a young man who is a constituent who is being treated by a
specialist at UCLA for a specific condition requiring him to take
Prevacid four times a day. When he was covered by Medicaid, he
received this dosage prescribed by his doctor. Now he is enrolled in a
Part D plan and only approved for 60 tablets per month, which is only
half the dosage his doctor prescribed. The doctor prescribed a certain
amount for his need. I have always been concerned that insurance
companies practice medicine and dictate the amount of medicine
covered. Now, though, it seems that this practice, through Medicare and
Medicaid, is being extended to our most vulnerable, often weakest and
sickest patient. I am concerned that the patients have to go through such
an arduous appeal process and I am wondering what you are doing, very
briefly, to ensure that insurance plans provide immediate coverage, not
only for the type of medicine but also for the quantity and the way that it
is prescribed by the physician?
DR. MCCLELLAN. Well, many plans do have limits on the number of
prescriptions, or the dose, or the number of pills provided.
MS. CAPPS. Contrary to the doctor?
DR. MCCLELLAN. Well, in some cases this is for safety reasons and
the like, but there needs to be a fast appeals process for resolving that.
MediCal does this. I actually prescribed under MediCal, as you know.
MS. CAPPS. I know, yes.
DR. MCCLELLAN. And I filled out a lot of prior authorization
requests for increasing doses beyond the usual approved amount. Every
plan in Medicare must have a fast process for resolving that issue with
the physician. If it is an urgent issue, the plan needs to get back to the
physician.

71

MS. CAPPS. You are working on a faster plan, then? Am I hearing

you say that?
DR. MCCLELLAN. Well, if it is an urgent issue, the plan needs to get
back to the physician within 24 hours. If the plan doesnt resolve it
promptly, it is an appeal that gets handled independently by a Medicare
reviewer and if it hasnt happened in this case, that is exactly what our
complaint lines and assistance-MS. CAPPS. But it is taking a long time.
DR. MCCLELLAN. Well, it shouldnt take long and I hope you will
send me the specific information on that case.
MS. CAPPS. I will send you the specific information, but I want to
move on. I listened to your response to Mr. Deal and because I have
been really concerned about fairness. Insurance companies can switch
around, and patients have to go through this arduous process. Even
though you answered him and I still believe that there are ways that
insurance companies, through the different tier levels and also because
they dont even have to notify a patient that they have changed, and they
can just post it on the web site. You know a lot of these seniors do not
have access to web sites, so I just want to register that, but I want to
move on because I have two more questions to ask you.
One has to do with proposals in Congress to extend the enrollment
deadline past May 15. Maybe this, because they are all coming from the
minority side, just has to be rejected out of hand, but I am imploring you
to see if there is some way that we can get the Administration to
acknowledge that we need to delay the deadline of May 15. I am afraid
we are going to hear--I mean, we heard loud and clear on January 1st and
the few days after that, but now we are going to find out that very vocal
Medicare recipients are going to run into that deadline and still be as
confused as they are telling me today.
So that is one question, but I want to ask another one right away, but
get an answer to both of these. There is certain evidence that some plans
are providing incentives to sales agents and encouraging employees to
entice beneficiaries into signing up for HMOs instead of just the
prescription plans. There is a reason the insurance companies havent
switched their plans yet, because they are still sweetening, they are trying
to enroll beneficiaries, so they are going to make it really nice for them.
I am sorry if I sound cynical about this, but I want to know what steps
you are taking to protect beneficiaries who are elderly and/or disabled
from being lured into HMOs when the stand-alone prescription benefit
would actually be best--and you have acknowledged that this is still one
of their choices. It may be the best and the most affordable coverage for
them.

72

DR. MCCLELLAN. Oh, absolutely. Stand-alone prescription plans

are available everywhere.
MS. CAPPS. But they are being enticed and baited into joining up
with HMOs and they are going to be left high and dry.
DR. MCCLELLAN. Well, the insurance agents are subject to two
kinds of oversight. First of all, they are overseen by every State. Every
State has a process, since this is a professional agent for licensing and for
oversight of their practices and second, Medicare has its own oversight
of agents that are involved in selling Medicare policies to make sure that
information is presented objectively and that beneficiaries are not given,
or that agents are not giving inappropriate financial incentives this year
and we would be happy to share the details of that.
MS. CAPPS. Can I get some evidence of this so I can use it on your
behalf in fairness to my beneficiaries?
DR. MCCLELLAN. Absolutely. And again, if we hear about any
complaints, we will take action. We have sanctioned several plans for
marketing violations, not particularly
[The information follows:]
CMS takes its responsibilities for monitoring and enforcing plan compliance with
Part D program requirements very seriously. Our aggressive oversight of prescription
drug plan sponsors has resulted in well over a thousand compliance actions this year.
Specific examples of compliance activities in the marketing area since last year relate to
agent misrepresentations or other misconduct, marketing prior to October 1, 2005, use of
unapproved marketing materials, and enrollment systems failures.
CMS uses the full range of available enforcement tools in pursuing plan compliance
with Medicare program requirements. This includes issuing numerous corrective action
plans and compliance warning letters. Usually, these steps lead to prompt, responsive
actions by plans. However, where necessary to achieve compliance, CMS will levy civil
monetary penalties and implement intermediate sanctions such as freezing marketing and
enrollment. Where necessary, we will also terminate plans. CMS compliance and
enforcement program emphasizes analysis of complaints and plan-reported data, along
with routine and focused program compliance audits. We are structuring the audits in a
way that ensures independence and unbiased objectivity. We have and will continue to
consider information on plan performance annually as we make contracting decisions for
future years including decisions on 2007 contracts.

MS. CAPPS. I just want to get a final yes or no answer to my

question. Will you extend the deadline?
DR. MCCLELLAN. We are focused right now on giving everybody
help with signing up. The wait times are down now, under a minute for
people who call 1-800-MEDICARE. We are helping-MS. CAPPS. There are millions of people who havent signed up.
DR. MCCLELLAN. And as you have seen the savings are even larger
than expected, hundreds of thousands of seniors are signing up every
week.
MS. CAPPS. So you are not committing to extending it?

73

DR. MCCLELLAN. That is what we are focused on right now. I have

heard from not only Minority members, but Majority members who are
widely concerned that every senior should have an opportunity to sign up
and that is why we are working so hard right now making sure that every
senior does, so let us keep talking.
MS. CAPPS. Thank you.
MR. DEAL. Mr. Bilirakis.
MR. BILIRAKIS. Mr. Chairman, I am really pleased to hear Ms.
Capps go into details here on problems now or potential problems or
whatever because that is what we should be doing. We should be
focusing really on that rather then the partisan rhetoric that we hear
sometimes during the opening statements. I would not endorse her
question, necessarily, but her point that there be a need for an extension
and if it looks like that is going to be the case, I will tell you, I will be
one of the first people who will be insisting that we do have an extension
there because again, our goal is to give everybody an opportunity to
enroll. We all admit there are complexities here and things of that nature
that may result in some people not being able to enroll in time, so
hopefully, Mark, we all have an open mind. We have asked them to
have an open mind, we should also have an open mind on some of these
things, particularly that area.
I would ask you, sir, step by step; I am an 83 year old beneficiary, I
am either computer illiterate or dont have access to one. Take me
through the process. I have decided, in spite of what I might read in the
newspapers and whatnot, I have read the AARP magazines or whatever
the case might be or my neighbors have told me hey, I should enroll so I
decided to enroll. Step by step.
DR. MCCLELLAN. Well, I have actually talked to a lot of seniors in
that situation down in Florida where we have a lot of organizations
working with us to help make sure people like the 83 year old man that
you mentioned can get their questions answered and can sign up for a
plan. There are lots of ways to get help. One is by calling 1-800MEDICARE, another is by looking for the events that are taking place
on an ongoing basis. We have had several thousand since the year began
already, on an ongoing basis, in your district and in his community to
find out more about this program. We also partner with the Florida State
Health Insurance Assistance Program that can provide-MR. BILIRAKIS. Well, forgive me. And they can go to some of the
pharmacists and they help them and I know some of the physicians help,
but let us say they passed that point and they decided they want to enroll.
DR. MCCLELLAN. Okay.
MR. BILIRAKIS. What do they do?

74

DR. MCCLELLAN. All right, they can call 1-800-MEDICARE and

we will walk through enrollment with them on the phone and take them-MR. BILIRAKIS. Okay, so that is enrollment.
DR. MCCLELLAN. That is right.
MR. BILIRAKIS. Okay.
DR. MCCLELLAN. If they still want help-MR. BILIRAKIS. Is that the only method of enrollment?
DR. MCCLELLAN. No, there are paper applications, as well, that you
can fill out. You can call the plans directly. You can work through one
of these many partner organizations. The enrollment form, itself, is just
a page, front and back, it takes us a matter of minutes to fill out.
MR. BILIRAKIS. Okay, so now they are enrolled and they have
already chosen the plan. When they have enrolled, it shows in the plan,
which can be a problem, too. I mentioned in my opening statement
about sitting in with pharmacists and I know some of them are, I guess, I
dont know whether they are mandated but they are certainly encouraged
by their employers, by the company to be very helpful.
DR. MCCLELLAN. Yes.
MR. BILIRAKIS. Now, what is the history there? Are we finding that
most pharmacists are educated well enough to be able to do this and are
willing to do it? How do we stand as far as that is concerned?
DR. MCCLELLAN. I think the most important thing is that we have
seen pharmacists all over the country demonstrate the professionalism of
their work and their devotion, really, to helping patients get the
medications they need. Independent pharmacists, chain pharmacists,
they have all been working very hard to help people take advantage of
the program and when there were, especially early in January, these
enrollment problems, where the data were not available that they neededMR. BILIRAKIS. Okay, they admit they had problems in January?
DR. MCCLELLAN. Yes. They solved those problems themselves. It
is a tremendous effort. Now, many of those pharmacists are benefiting
from the fact that the wait times have come way down. If a pharmacist
calls our toll free help line for pharmacists, they have no waiting at all.
The plan wait times are generally now in the five minute range; many
plans, lower than that. That is all very important progress, but it is still a
lot of work for pharmacists. You are going to hear from some later who
have some very good ideas about how this process can be improved even
further, steps like getting more standard messages back from the
different drug plans when a prescription is not approved so they will
know exactly what to do; they wont have to look it up in a manual.
Steps like getting more standardized forms for-MR. BILIRAKIS. That is needed greatly.

75

DR. MCCLELLAN. That is right. And so those steps are coming, as

well. Many pharmacists spent a lot of time in preparation, but especially
for the independent pharmacists, they have limited resources, they are
very busy running essentially a family business and they have a lot of
things going on at the same time, so we have also worked through their
associations, through their software vendors, through the different-through the wholesalers. Representative Buyer mentioned earlier about
the need to get the payment timing matched up now with this new
system, to help provide some additional relief for the burdens that they
are facing now. I think there is more that we can do there. We have seen
a lot of progress in just eight weeks in the program, but there are more
steps that we can take and I truly appreciate the constructive ideas and
support from pharmacists in helping us.
MR. BILIRAKIS. And I agree with you. Thank God for them and
they have said the same thing to me, that January was a really horrendous
month but things have really smoothed out and of course, there is the
reimbursement, what they are compensated, a dollar and something per,
what is it, per prescription?
DR. MCCLELLAN. We want to make sure that the reimbursements
happen according to the contract schedule, so any pharmacists who are
not being paid according to their contracts, we want to hear about it. We
will investigate those further and make sure the plans are living up to
their-MR. BILIRAKIS. Thank you for all your work, Doctor.
MR. DEAL. Ms. DeGette.
MS. DEGETTE. Thank you, Mr. Chairman. Mr. Chairman, in the
absence of the committee Chairman, I just want to say that several of the
Majority members said in their opening statements the Democrats
wanted this program to fail and all we were was critical of it and in truth,
while all of us voted against the bill in the first place, it passed and we
felt like we had a duty to our constituents to tell them they needed to
enroll in this program, if, in fact, when it passed. So for people like me, I
sent a mailing out to my seniors, Ms. Capps is nodding. She did it, too.
We sent mailings out telling them how to enroll. We had town hall
meetings and forums. We did everything we could and are continuing to
do everything we can even though we think it is a bad program. We
dont think it is going to work too well.
We think that our constituents should sign up and I think the record
should reflect that because we all are really trying to make it work, but
what frustrates us is that many people seem to be denying that there are
some pretty massive problems with this program and Dr. McClellan, I
know that you agree that there are some issues that need to be resolved
still, so that is kind of what I want to explore with you this afternoon.

76

I was heartened to hear Chairman Barton say that in his State, or in

his district, people seem to be signing up for this program because in
Colorado, my home State, we have over 529,000 Medicare beneficiaries;
353,000 of them have drug coverage, but only 46,000 beneficiaries have
actually signed up for the stand-alone PDP and the rest are either in
Medicare Advantage, they are dual eligible and so they are automatically
enrolled or they have retiree drug coverage through their former
employer, so that leaves about 176,000 beneficiaries in Colorado who
have yet to sign up for the plan. So my question is how are we going to
get these--and I know this is not unique to Colorado. I dont think we are
the worse State on this. My question is how are we going to get these
remaining 80 percent of people who havent signed up for a stand-alone
PDP to do so by May 15th?
DR. MCCLELLAN. Well, Congresswoman, as you know, about twothirds of the beneficiaries in Colorado are getting coverage now and
thousands more signed up in the last four weeks alone. There are events
that are taking place-MS. DEGETTE. Right, 46,000 have signed up and that is out of
529,000 Medicare beneficiaries. Now, some of them have Medicare
Advantage, as I said. Some have private coverage, so are we just not
worrying about getting them enrolled?
DR. MCCLELLAN. All those beneficiaries are very important to us.
Close to 300,000 of the beneficiaries in Colorado have coverage now.
Many are getting-MS. DEGETTE. But not though this Part D program.
DR. MCCLELLAN. Well, but they dont all need to get it through
stand-alone plans. Medicare Advantage plans are more widely available
than ever before and we have had half a million people sign up for
Medicare Advantage plans just in the last four weeks. And in the last
four weeks alone, we saw thousands of people enroll in stand-alone
prescription drug plans, as well, so people in Colorado are finding out
about this program. I think that there are a lot of ways that we can keep
working together to help make sure even more can take advantage of it.
We have partners working with-MS. DEGETTE. So let me ask you this. What I am hearing you say,
then, is if people are in other programs aside from the stand-alone PDP,
you are not really worried about them, right?
DR. MCCLELLAN. I am worried about making sure that everyone
gets the support they need to make a decision about this coverage.
MS. DEGETTE. Okay, that is going to be 176,000 in Colorado alone.
By May 15th, how is that going to happen?
DR. MCCLELLAN. Well, a lot of those beneficiaries already have
coverage from the VA or they are already getting coverage from

77

elsewhere and dont want to sign up. Many people may go ahead and
make an enrollment decision and those are the ones, the people who-MS. DEGETTE. How many is that?
DR. MCCLELLAN. It could be-MS. DEGETTE. You dont know. I mean, you cant say off the top
of your head.
DR. MCCLELLAN. Well, I cant say off the top of my head because
many people in Colorado get covered through the VA or they have
another source of coverage already.
MS. DEGETTE. So you are just not going to worry about getting
them enrolled.
DR. MCCLELLAN. I am absolutely worried about getting them
enrolled and that is why we are-MS. DEGETTE. Well, how are we going to do it? It is 80 percent of
the people and I understand some of them have other coverage, but
starting May 15, they are going to start to be penalized if they, 1 percent,
and it compounds if they dont enroll in it.
DR. MCCLELLAN. That is why we want them to hear about this
program now and know that there are lots of places they can go for help
if they have questions about enrollment. They can call 1-800MEDICARE-MS. DEGETTE. Okay, with all due respect, they have heard about it.
They have heard about it from me. They have heard about it from TV.
They are confused or they are mad or they are whatever and they are not
signing up, so why is the Administration so dead set on enforcing this
May 15th deadline which is, it is going to affect all these people who
have coverage other places.
DR. MCCLELLAN. Congresswoman, what I was just trying to answer
is the places that they can go right now to get their questions answered.
You said they have questions, you said they want to get more
information. What I hope we can focus on is the places that they can go
and the resources available to them to get their questions answered, like
calling 1-800-MEDICARE or-MS. DEGETTE. Okay, can I say something? As far back as last fall,
they have known that and May 15th is coming up and they are not doing
it for whatever reason.
DR. MCCLELLAN. Well, I am not sure all of them do know that. We
have been trying very hard to make sure people know where they can
call and I appreciate your help in town hall meetings and the like to get
the word out. Many people, though, seem to be getting the wrong
impression that this is a benefit that is only for people in HMOs. That is
not the case and I want to make sure we are getting the facts out with
you.

78

MS. DEGETTE. Okay. So you think you can get everybody enrolled
by May 15th?
DR. MCCLELLAN. I want to do all we can to help.
MS. DEGETTE. Yes or no. Can you get them all enrolled by May
15th?
DR. MCCLELLAN. This is a voluntary program. Not everybody may
choose to enroll in the program.
MS. DEGETTE. Okay.
DR. MCCLELLAN. What we want to do by May 15th is make sure
that everyone has an opportunity to find out and to make a decision about
the coverage because they can save a lot of money and get-MS. DEGETTE. Okay. You dont need to sell the program to me. I
know a little bit about it.
DR. MCCLELLAN. I know you do.
MS. DEGETTE. But let me ask you another question. For these dual
eligibles, the low-income Part D folks, a lot of those people have applied
and they are waiting for their applications to be approved before they
sign up for a plan because in large part, they cant afford to do it without
a subsidy. Now, SSAs deadline for processing the applications extends
beyond the May 15th deadline for beneficiaries to sign up for a plan
without a penalty. So my last question to you is if a low-income
Medicare beneficiary doesnt hear about their subsidy until after May
15th, then they are going to incur a 1 percent penalty for the rest of their
lives for not signing up earlier. Has your agency considered doing
something about those people because there are two separate deadlines
and one is later than the other?
DR. MCCLELLAN. That is a very good point. We have been working
with Social Security on ways to get their processing time down, the time
to get this information in the system, so I would like to talk with you
further about additional-MS. DEGETTE. Okay, would you be willing to consider, for those
folks, extending the deadline for the penalty past May 15th?
DR. MCCLELLAN. For people who are low-income, who have tried
to-MS. DEGETTE. Who have applied.
DR. MCCLELLAN. --get enrolled in the program, who have applied,
if you want to-MS. DEGETTE. And they have not heard-DR. MCCLELLAN. Absolutely. We want to find a way for them to
take advantage of the program and I would be delighted to-MS. DEGETTE. And so would you be willing to consider extending
past May 15th for that group of people the, for waiving the penalty.
Would you be willing to consider that, yes or no?

79

DR. MCCLELLAN. I am willing to consider the best-MS. DEGETTE. Thank you.

DR. MCCLELLAN. --approaches to make sure they can take
advantage of the benefit.
MS. DEGETTE. Thank you.
MR. DEAL. Mr. Buyer is recognized for questions.
MR. BUYER. Dr. McClellan, I have great respect for the job that you
have in front of you. What I would like for you to know that those who
ride the unicorn and dream are not just individuals in our own society
that have some socialist view. Let us go to a socialist country for a
second, okay? Let us go to one, okay. So let us go to their dreamland
for a moment. Oh, this is a wonderful newspaper here, right? The
International Express, United Kingdom. Look at this. The cancer drugs
ruling scandal. The courts made a ruling. Now, those of who even ride
the unicorn in a socialist system are upset in Great Britain. Why? Let us
figure out why.
See, the ruling condemns women to death in the United Kingdom.
What is this about? So the courts rule that the national health system
primary care trust, they couldnt force the trust to give Herceptin to
women with breast cancer. So here we have this whole situation again.
You have a blockbuster drug. People, not only in America, but around
the world have this expectancy of a right to a drug at a cost for which
they are only willing to pay. Wow. That is this fantasy world out there
that somehow--how are we ever going to be able to achieve these great
blockbuster drugs that can save human life, Doc?
So I just want to let you know that the challenge for which you are
facing, okay, is by the riders of the unicorn that are not only in America,
but they are also all over the world, okay? I just found this rather
intriguing, so it is not just you, okay? So those who ride the unicorn, I
guess, have this expectancy and right that everybody ought to be able to
get a drug, equal basis for free, are the same belief that everybody ought
to drive the same type of automobile. That is why earlier I said the dead
horse is the command economy. It was in Russia and it failed.
Let me ask this question. Earlier on in my opening comments, I
asked you about this difference between the word that you used in your
national letter about requested versus required, so this will go to your
authorities. So trying to make sure that the plans are responsive to the
pharmacists, tell me what you perceive your authorities are with regard
to these plans.
DR. MCCLELLAN. We have extensive authorities to make sure that
the plans fulfill their contractual obligations to provide timely access to
drugs and timely reimbursement according to contracts with the
pharmacies. That authority has been used to take steps like making sure

80

that the transition period was extended in order to accommodate the fact
that many beneficiaries couldnt get through to their plans early in
January and that not enough steps had been taken to successfully
implement prior authorization appropriately and effectively for all
beneficiaries.
It is authority that we are using to make sure that if a pharmacist has
a complaint about how they are being paid, about whether their payments
are being made according to contractual schedule, that we can look into
that, and if we see patterns of abuse that the plans dont respond to
quickly, we can take further actions. We have a range of further actions
we can take when necessary that goes all the way up to suspending
enrollment in the plan or eliminating it from the prescription drug
program.
MR. BUYER. With regard to individuals who are communicating
directly with the pharmacist, one of the concerns has been will the
message or the answer be consistent? You know, all these pharmacists,
they all know each other. They are all trying to work through it, too. So
my question is are you working on a standardization of the
communication?
DR. MCCLELLAN. We are and we have seen a lot of leadership in
making that happen from the pharmacy community. Some of the
representatives of the independent pharmacists and the chain pharmacies
are working with the drug plans to come up with what those standards
should be and we have already seen some early benefits of that work.
For example, this past week this collaboration of plans working with
pharmacies and other groups sent a letter to the standard setting
organization to request that standards be added in certain areas where
plans have been getting different kinds of messages back. Now, I think
we are going to see more of that in the weeks ahead.
MR. BUYER. Would you address the concern I raised earlier about
what I title economic defibulation? How we are actually going to be able
to put all this on a proper cycle to give everybody back-DR. MCCLELLAN. That is a good question. We have already had
some discussions with wholesalers and distributors who have made
adjustments in many cases in their payment schedules to accommodate
some of the payment issues, especially back in January when there was
this gap between when the Medicaid payments and the cash payments
stopped and the drug plan payments started. I think pursuing that to
make sure that the payment systems work as smoothly as possible for
pharmacists-MR. BUYER. We want to work with you. Thank you.
DR. MCCLELLAN. We will do that.
MR. DEAL. Mr. Dingell is recognized for questions.

81

MR. DINGELL. Mr. Chairman, I will be submitting a letter to the

witness requesting answers to a series of rather complicated questions for
which there is not time at this moment. I ask unanimous consent that the
record remain open and that I be permitted to insert the same into the
record?
MR. DEAL. Without objection.
MR. DINGELL. Thank you, Mr. Chairman. Witness, these question
are--I have tried to craft them in a way that if you would choose to
answer yes or no because of the difficulty that we confront in dealing
with the complexity of this question. So if you can, yes or no. Isnt it
true that CMS does not know how many of the top 100 drugs used by
seniors are subject to prior authorization across all stand-alone Part D
plans?
DR. MCCLELLAN. Well, yes. The plans have told us-MR. DINGELL. Thank you. Now, let me proceed, if you please.
Isnt it also true that, as you mentioned on page 34, that CMS does not
have procedures such as time frames for exceptions and appeals in order
to define how the appeals and the requests for relief from the
bureaucratic processes of the insurance plan are attended to?
DR. MCCLELLAN. Yes, we do have time frames and-MR. DINGELL. You do?
DR. MCCLELLAN. We do have time frames for exceptions and
appeals and the time frames for urgent exceptions where the beneficiaryMR. DINGELL. I would appreciate it if you would submit to us a
clear statement of what it is that the rights of a citizen are and how you,
at HHS, standardize these matters?
DR. MCCLELLAN. Well, we would be glad to do that.
[The information follows:]
INSERT FOR THE RECORD OF THE HON. MARK MCCLELLAN, ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES
There are five levels of the appeals process that an enrollee may appeal to:

Level

Standard Appeal

Redetermination
by Part D Plan

If the Part D plans initial coverage

determination is unfavorable, an
enrollee may request a
redetermination and the plan has up to
7 days, to make its decision.

Reconsideration

If the Part D plans redetermination is

Expedited
Appeal*
Same as standard
except the
timeframe is up to
72 hours for the
plan to make its
decision.
Same as standard

82
by Independent
Review Entity
(IRE)

unfavorable, an enrollee may request a except the

reconsideration by an IRE, which is a
timeframe is up to
72 hours for the
CMS contractor that reviews
determinations made by a plan. The
IRE to make its
IRE has up to 7 days, to make its
decision.
decision.
3
Administrative
If the IREs reconsideration is
Not applicable.
Law Judge
unfavorable, an enrollee may request a
(ALJ)
hearing with an ALJ if the amount in
controversy requirement is satisfied.
4
Medicare
If the ALJs finding is unfavorable, the Not applicable.
Appeals Council enrollee may appeal to the MAC, an
(MAC)
entity within the Department of Health
and Human Services that reviews
ALJs decisions.
5
Federal District
If the MACs decision is unfavorable,
Not applicable.
Court
the enrollee may appeal to a Federal
district court, if the amount in
controversy requirement is satisfied.
*An expedited decision is requested based on the urgency of an enrollees health
condition.
CMS and Part D plans will be providing a considerable amount of information to
beneficiaries, caregivers, patient advocacy groups, providers, and the general public
about coverage determination and appeals processes so that all Medicare beneficiaries
receive medically necessary drugs and their continuity of care is preserved. CMS will be
monitoring plans and reviewing beneficiarys complaints to ensure that plans do not
engage in discriminatory practices. Enforcement actions will be taken against plans that
violate Medicares requirements.

MR. DINGELL. I note, again, yes or no, CMS does not have good
data on how many of the drugs in the six protected classes, that is mental
health drugs, cancer drugs, et cetera are still subject to prior authorization
across plans, yes or no?
DR. MCCLELLAN. For people who are already stabilized on the
drugs-MR. DINGELL. Six protected classes.
DR. MCCLELLAN.
They are generally not subject to prior
authorization.
MR. DINGELL. They are not?
DR. MCCLELLAN. They are not. If people are already stabilized on
a certain drug, they can continue using that drug. For someone who is a
new user, the prior authorization procedures do need to be noted by the-MR. DINGELL. What happens when the beneficiary goes to the
pharmacist?
DR. MCCLELLAN. If the beneficiary is already taking drugs that they
need for their mental health, for their mental wellness, the beneficiary is

83

getting covered for those drugs and millions of our beneficiaries are
getting that coverage right now.
MR. DINGELL. What protection do you give the beneficiary against
unaffordable cost sharing?
DR. MCCLELLAN. Beneficiaries with limited incomes have a
tremendous benefit where they are paying only $1 in $3 in cost sharing
for their drugs. The beneficiaries-MR. DINGELL. The answer really is nothing.
DR. MCCLELLAN. I think the answer is that millions of beneficiaries
have new coverage that they didnt have before so they can afford the
drugs that they couldnt in the past. That is why we are seeing so many
more prescriptions being-MR. DINGELL. Let us hope that the beneficiary has the good eye of
the Lord, the good ear of the Lord because I am not sure he will get
much help from the agency. Now, let us talk about this. CMS cannot
provide me the number of beneficiaries that have been denied or failed to
get medicines they were told were on the formulation or rather, on the
formulary because of prior authorization procedures. Is that correct or-DR. MCCLELLAN. We will be reporting on complaints that
beneficiaries bring about prior authorization or formularies not being
followed. We will be making that information public in the coming
weeks. We are just gathering that now. We are only eight weeks into
the program and our focus has been on identifying problems and getting
them solved individually so that beneficiaries get the medicines they
expect.
MR. DINGELL. Let me just ask you a simple question. If you dont
know how many people have been denied, how then can you say this
plan is working well?
DR. MCCLELLAN. Because we know that millions of prescriptions
are being filled and we know that when a beneficiary has a complaint
and brings it to us, we work with the plan to solve that complaint.
MR. DINGELL. You are one of the more trusting people that I have
had before this committee as a witness. Isnt it true that many Part D
plans have higher cost sharing than is usually seen in commercial plans,
yes or no?
DR. MCCLELLAN. The drug plans had a benefit design that is less
generous than some employer plans. The drug benefits are providing
more than 50 percent savings for people with Medicare.
MR. DINGELL. Thank you very much. Now, dont we have a
situation where there is no clear way that a complainant or a covered
beneficiary can know that he or she has a standard right to appeal from
denial or non-coverage on the formulary?

84

DR. MCCLELLAN. Beneficiaries can get that information from many

different sources. They can call 1-800-MEDICARE, you can get from-MR. DINGELL. What are the rules the Department has to assure that
there is such a standard mechanism?
DR. MCCLELLAN. When an appeal comes in to us, it is handled by
an independent Medicare reviewer not connected with the plan, who
follows a standard set of procedures.
MR. DINGELL. I am not asking you how you handle it, I am asking
you what assurance is there that there is a standard mechanism for
handling these that can be easily understood by the beneficiary?
DR. MCCLELLAN. Well, that is part of our oversight, which I take
very seriously, that we have independent reviewers available if a
beneficiary hasnt been able to work out a coverage issue with the plan,
they can quickly come to us to get appropriate resolution. It is a very
important part of our oversight.
MR. DINGELL. I will be sending you some, I am sure, because I am
sure we will shortly be receiving complaints on this matter.
DR. MCCLELLAN. Well, please do.
MR. DINGELL. Mr. Chairman, I thank you. I yield back.
MR. DEAL. Chairman Barton is recognized for questions.
CHAIRMAN BARTON. Thank you, Mr. Chairman. Thank you, Dr.
McClellan. Doctor, how many plans are out there for seniors to choose
from?
DR. MCCLELLAN. It depends on where they live, but in most regions
of the country, there are between about 11 and 20 organizations that are
offering prescription drug coverage. Some of them offer a basic plan
that is very low cost. In many parts of the country you can get coverage
starting at $2 a month and that goes up to a much more comprehensive
benefit with no donut hole, no deductible, very comprehensive for the
beneficiaries who want that.
CHAIRMAN BARTON. So what would be the least number of plans in
any part of the country? In other words, where are there fewer plans?
And if you know how many that is it would be great.
DR. MCCLELLAN. I dont have exact numbers off the top of my
head, but in Alaska and Hawaii, probably in the range of 30 or so
choices.
CHAIRMAN BARTON. Thirty or so choices in Alaska and that would
be the fewest?
DR. MCCLELLAN. Yes.
CHAIRMAN BARTON. And in most of the country there were, I have
heard, up to 70. Is that a fair estimate?
DR. MCCLELLAN. Probably not that large. Typically, there would
be 40 to 50 plan options.

85

CHAIRMAN BARTON. Forty to 50. Now, to go to Congressman

Dingells question about a drug that is not on the formulary. Why would
a person with that many plans choose a plan that didnt cover the drugs
they were taking?
DR. MCCLELLAN. Well, one of the options that is available to
beneficiaries now, which is a really first ever is if they have a specific set
of drugs that they like that they want to be sure is covered, they can find
out from us ahead of time not only which plans cover those drugs, but
how much they can save on those plans and it is much better, I think,
than just having one national formulary where the vast majority of
beneficiaries would have no choice but to have to change the drugs that
they are taking. You know, they can do that if that is what they want to
do, but they have got the option-CHAIRMAN BARTON. Is it a fair statement with that many options
and that many plans that admittedly that it is complicated and it is
difficult to sift through all these plans? That is a fair criticism. But with
that many choices, there cant be too many people that cant find a plan
that covers, if not all the drugs, the overwhelming number of drugs that
they actually take on a routine basis.
DR. MCCLELLAN. That is right. Out of the top drugs used by
seniors, plans generally cover 70 or 80 or more of the top 100 and there
are plans available that cover all 100 of them and not only that, people
can get coverage that fits what they want, no deductible; a flat,
predictable co-pay, if that is what they want; the kind of coverage they
want with the drugs that they want.
CHAIRMAN BARTON. How long do you think it is going to take to
get the not just anecdotal stories, but real data about any systemic
problems? I mean, it would be a problem if let us say half the seniors
chose one plan and that one plan didnt cover two of the most routinely
taken drugs. That is a problem.
DR. MCCLELLAN. We are tracking the complaints that we get about
plans and those have generally been going down. We had more in early
January when, as we have already discussed, there were some data
problems, and wait time problems, and people had more trouble getting
their prescriptions filled, but we will keep watching closely. So far, we
are seeing millions of our beneficiaries getting coverage for the first
time, millions more getting much more comprehensive coverage than
they have ever had from Medicare and so they are getting those
prescriptions that they want filled on the plan that they chose.
CHAIRMAN BARTON. There has been some criticism that these plans
can drop drugs from the formulary and I think that is a valid criticism. Is
it also true that they can add drugs?
DR. MCCLELLAN. Yes.

86

CHAIRMAN BARTON. Now, if, in fact, you have a popular plan, that
there is consistently a drug or two or a half a dozen that people need and
they are not on it, what does the plan sponsor have to do to get it? Do
they have to get permission to put these drugs on the formulary or do
they just do it? What is the process?
DR. MCCLELLAN. They can just do it and we have seen that happen
with new drugs that have been approved by the FDA since the
formularies were first submitted by the plans. We have seen no cases of
plans dropping drugs that they initially put on their formularies.
CHAIRMAN BARTON. What is the experience, if any, so far in the copayment price in the monthly premium that people are paying? Are
those going down or going up?
DR. MCCLELLAN. Premiums are set. Those are locked in for the
year. The out-of-pocket payments that beneficiaries are making are set
in many of the plans. That is why I think a lot of people are choosing
plans that have a flat co-pay, you know, $3 for a generic drug, $20 for a
brand name drug. That is set for the year, as well. The price changes
that we have seen have generally only happened on drugs where the price
for the drug went up across the board, not in Medicare only, but in public
plans like Medicaid and the VA, as well, and we have not seen any
disproportionate rises in the Medicare program even in those cases.
CHAIRMAN BARTON. And this is my last question because my time
has expired. Is there enough data yet to indicate which plan is turning
out, on a national basis, to be most popular? Are you seeing a
preponderance of the seniors gravitate to one particular plan or to one
group of similar type plans?
DR. MCCLELLAN. Well, if you look at the press releases and the like
from the drug plans, there definitely are some plans that are turning out
to be more popular than others. What I can tell you is that seniors are
generally not choosing the plan that was designed by the Congress,
despite everyones best efforts. They are choosing, instead, plans that
have no or little deductible, that have flat co-payments that fill in the
donut hole, that have other features that the plans have designed because
that is what they thought people would want instead of the standard plan.
From that standpoint, the market is giving people better benefits at a
lower cost, a much lower cost than people had expected.
CHAIRMAN BARTON. Is that a good thing or a bad thing?
DR. MCCLELLAN. I think it is a very good thing, from what the
many seniors that I have talked to around the country have said. You are
right, that it does take some effort to find out about the plans and choose
a plan that is good for you. But my experience in talking with seniors,
which is born out in survey after survey, is that seniors who have been
through the process overwhelmingly say it was worth the effort, they are

87

saving a lot of money, they are getting the kind of coverage that they
want, they got to choose a plan and we are seeing that happening for
millions of Medicare beneficiaries for the first time ever.
CHAIRMAN BARTON. Thank you, Mr. Chairman. Thank you,
Doctor.
MR. DEAL. Mr. Waxman is recognized for questions.
MR. WAXMAN. Thank you very much, Mr. Chairman. Dr.
McClellan, I would like to ask you about a disturbing finding about
increasing prices under the new Medicare program. In a report released
last week by my staff, they compared the prices offered for identical
drugs by ten Medicare drug plans in December of 2005 and then
February 2006, and the findings were shocking, even to those of us who
already had concerns about Medicare plans. In just the first seven weeks
of this new Medicare drug program, average prices for ten leading brand
name drugs increased by 4 percent. The average price for one drug, the
stroke medication Plavix, increased by 11 percent. Are these kinds of
increases, price increases what you have in mind when you claim that the
competition among the plans is helping to hold down prices?
DR. MCCLELLAN. Absolutely not, Congressman, and that is why we
went back and looked at the price changes that your staff reported on and
found that the actual increase, if you look across all the Medicare
prescription drug plans, matches up with the average increase in AWP,
that is the price charged for all payers, whether you are Medicare or
Medicaid or the VA, any program, and many of the plans have had
smaller increases because they have flat co-pays that dont change at all.
So we have seen no significant changes other than what has been due to
the increase in the list prices for the drugs that apply to everyone,
including the VA programs and other programs. We are watching this
very closely.
MR. WAXMAN. Well, this a very short period of time to have a 4
percent increase in the price of these drugs. We are talking about a
matter of weeks.
DR. MCCLELLAN. Well, it is a result of the timing that you looked
at. Around January 1st is when a lot of drug prices historically have
increased. These AWP changes occur on a quarterly or annual basis and
the drugs that have the AWP increases were pretty much the drugs that
had the increases on January 1st, 2005; January 1st, 2004. I think the
good news here for seniors is that they are getting discounts now of 30
percent to 50 percent off the prices of drugs on average and that they are
continuing to get those discounts, so if these prices go up, they are still
getting big savings compared to what they would pay on their own
and/or in any other program.

88

MR. WAXMAN. Well, with all due respect, I think you are
illustrating why CMS has a credibility problem because the facts on the
ground are pretty clear and these facts show the drug prices are going up;
several analysts have seen it, and as far as the discounts, the first thing I
want to mention is that the analysis from my staff has shown that the
drug plans arent providing big discounts at all. The prices are way too
high. But more importantly, what my latest report shows is that even if
the plans do provide some kind of discounts, they can raise the prices at
any time and make these discounts disappear. That is what seems to be
happening here. Plans have raised prices over 4 percent in just a few
weeks.
DR. MCCLELLAN. Again, if you look across not just the ten, you
know, plans that your staff handpicked, but across all the plans, look at
the average change in prices. The average change across all the plans is
only around 3 percent, which matches up with the numbers in your own
report for how AWP has gone up, the price changes that you saw that are
occurring in the VA and Medicaid programs and other government run
programs, as well.
MR. WAXMAN. Well, let us look at that, because there are other
benchmarks. The prices offered by the Medicare plans have gone up far
faster through the other benchmarks such as they have gone up faster
than the wholesale drug prices, even though you say it is the same as the
wholesale price drug price increases. They have gone up faster than drug
prices in Canada.
They have gone up faster than prices at
Drugstore.com. It seems to me that we are finding a big increase and not
a decrease that we thought was supposed to be the result of this
competition. One of the most disturbing things that my report found was
that the plans that posted the lowest prices in December had the biggest
price increases in February. This looks like a classic bait and switch;
after millions of beneficiaries signed up for the plans, all of a sudden
price increases by as much as 10 percent in just seven weeks, can you tell
me what CMS is doing to keep plans from pulling these kinds of bait and
switch-DR. MCCLELLAN. Well, we have been tracking the prices since this
program began, since the data started being posted in November. By the
way, this is the first time we have had this kind of transparency in
prescription drug pricing ever and I am glad that your staff is taking
advantage of some of that information, but we have been watching it
closely since the beginning of the program. Again, the increase that we
have seen, I had a long letter to Consumers Union about this--they had
some concerns and it is appropriate for everybody to be watching this
very closely--where we went through in detail the price changes they had
seen and showed that it was due to two things; one is where the AWP for

89

the drug changed, which applies to everyone, whether you are in

Medicare or in the VA or any other program.
MR. WAXMAN. I know that is your argument.
DR. MCCLELLAN. And number two, to some specific data problems
from week to week and what certain plans had submitted. When the
plans fix their data, which we monitor closely as well, the price increases
that you might have thought were there really werent there. Nobody is
paying those price increases at the counter.
MR. WAXMAN. I hate to do that, but I do want to interrupt you
because-DR. MCCLELLAN. You dont need an explanation. It is your
prerogative.
MR. WAXMAN. I just think if people who have to figure out this
whole thing, seniors, they look at the myriad co-pays, the premiums, the
deductibles, and they have no idea what they are really paying for and I
dont think that we can say competition is working or even can work in
this kind of atmosphere, but I want, in the few minutes I have left, to ask
you about these Medicare and Medicaid dual eligibles. Medicaid has a
provision that requires via a rebate system, the Federal government
receives a drug manufacturers best price on prescription drugs.
Suddenly they are all being switched over to Medicare and this best price
rebate is no longer in effect. The result is a multi-billion dollar giveaway
to the drug manufacturers.
Dr. Steven Sondermeyer, University of Minnesota, estimated drug
prices for these dual eligibles are now 20 to 30 percent higher than the
Medicaid program. My staff has estimated these higher prices will result
in a windfall of $30 billion for drug manufactures, all of this at
taxpayers expense. Can you explain the rationale for me? It makes no
sense that all of a sudden the Federal government is paying billions of
dollars more for drugs that we were getting at a discount prior to January
1. This looks like a multi-billion giveaway to the drug manufacturers.
DR. MCCLELLAN. The drug savings from the Medicare prescription
drug program usually exceed the drug savings available for Medicaid.
We are seeing that in a couple of ways. Number one, States that are
participating in our reimbursement program have differentials made up
by us because the total cost, the total payments for the drugs by the drug
plans, are less than what they were paying in Medicaid. And number
two, as you saw from our own independent actuaries report, the cost of
this drug benefit is much lower than projected because they are getting
savings on average of 27 percent. That includes substantial rebates that
are larger than the savings that Medicaid-MR. WAXMAN. I want to dispute that because independent Wall
Street analysts have estimated that the higher prices, and there are higher

90

prices, are going to result in over $1 billion in manufacturer profits in

just five drugs. Other industry analysts have estimated the windfall, in
just the first year, is going to be over $2 billion and more importantly,
Dr. McClellan, your own data tells a different story. Just last week CMS
actuaries estimated that the Medicare drug plans would obtain drugs of
20 percent off of the manufacturers listed average wholesale price and
several months ago, the Congressional Budget Office produced the same
estimates for the Medicaid program. They found that the Medicaid
program receives an average discount that is 25 percent larger than this
CMS estimate, so I am not sure that you are getting the accurate
information when you say Medicare prices for brand name drugs are
even better than the Medicaid best prices. I would like you to give us
some more details that back up this-DR. MCCLELLAN. We have a comprehensive report that we are
releasing that we will share with you that reviews all of this and Ill just
repeat what our independent actuaries have found. What they found is
number one, the costs of this drug benefit are much less than expected
because of this very aggressive price negotiation and not only that, the
cost of their forecasting for overall prescription drug spending in the
United States has gone down significantly, they said because of the drug
benefit and the aggressive price negotiation. Second, as the independent
actuaries have said, any additional government negotiation using the
Medicaid approach would not lead to lower costs of this program.
MR. WAXMAN. Aggressive price negotiation would be if the Federal
government negotiated for the best price for all the people that are
getting these drugs. That is prohibited in the legislation and I do believe
that we will get the backup for your comments, but I do believe that the
Medicaid price has always been and continues to be a lot cheaper than
what we are paying for the same people for the same drugs now that they
are switched over to Medicare.
DR. MCCLELLAN. We do need to make sure our staff goes over our
results with your staff so hopefully we can get to a consistent answer
here, but the numbers on the premiums, the numbers on the overall cost
of the drug benefit, seniors around the country who are getting coverage
for $20, $10 or even less are seeing the savings right now, made possible
by the aggressive negotiation that is going on. I suppose you could
potentially get more savings if we were more restrictive in what drugs
people had access to. For example, the VA, that you cite in your study,
has prices for-MR. WAXMAN. Medicaid wasnt more restrictive than what they
are--

91

DR. MCCLELLAN. Oh, Medicaid prices are not lower than ours and
for the VA, six out of the top ten drugs used by seniors arent on the
formulary.
MR. DEAL. Dr. Norwood is recognized for questions.
MR. NORWOOD. Thank you very much, Mr. Chairman, and if, Dr.
McClellan, I am going to stay with this subject because I think it is very,
very important that we all understand this cost picture. Now, I hear you
say that patients are going to pay less money for their meds.
DR. MCCLELLAN. Right.
MR. NORWOOD. Is that a correct statement?
DR. MCCLELLAN. That is correct.
MR. NORWOOD. Will the taxpayer pay less money for their meds
than they might under any other circumstances?
DR. MCCLELLAN. Well, I hesitate to say under any other
circumstances. I can tell you that-MR. NORWOOD. Well, specifically to the circumstance we know
about, then, which would be Medicaid.
DR. MCCLELLAN. Sure.
MR. NORWOOD. Say it a different way or say it so this old country
boy can understand it.
DR. MCCLELLAN. Okay, well let me say it again. Usually the drug
prices under Medicare, counting for the rebates, are less than the drug
prices under Medicaid. We have good first-hand experience on this now.
You know, we are reimbursing some of the States for the cost that they
have incurred for some of their dual eligibles during this transition
period. The plans are paying them back first, but because in some cases
the States paid more under Medicaid than the plans are paying for their
drugs, we are making up that difference. So that is adding a little bit to
the cost or implementation of the program. Another piece of evidence is
the fact that the cost of this drug benefit is turning out to be more than $5
billion lower this year alone because of the aggressive price negotiation
that is going on.
You asked if it is possible to get more savings. It might be if we had
even more, if we had more restrictive drug formularies, if we had more
restrictive prior authorization, but I dont want to do that. I think there
are a lot of beneficiaries who dont want to be in an HMO-type plan
where, as in the VA system where six out of the top ten drugs arent even
covered on the formulary.
MR. NORWOOD. Now go there a little bit. Explain that some more.
The VA cost of medications we buy, the government, from
pharmaceutical companies at the Veterans Administration, that whole
purchase is generally lower, you are saying.

92

DR. MCCLELLAN. They do have lower drug cost, but they have
some very important differences. Number one, you cannot get those
drugs at a retail pharmacy in your community. You have to go to the
pharmacies that are within this government-run system; there are not
very many of those and that is why 75 percent of the drugs prescribed in
the VA system are done by mail order. Many seniors dont want to go to
mail order, they want to use their local retail pharmacist.
The second difference is that these drugs are prescribed within what
is essentially an HMO-type of coverage arrangement. They are salaried
doctors that work for the government in only a limited number of
facilities that prescribe the drugs and they work within the VA system.
Many seniors dont want to get their care through an HMO-type of
arrangement.
A third difference is in how the formularies work. Under the
Medicare program we have had fairly broad requirements about access to
medicine, so 80 or more out of the top hundred drugs are typically
covered by a plan. The numbers in the VA are significantly less. Six out
of the top ten drugs are not covered, for example.
MR. NORWOOD. So Mr. Waxman, his view of it is that the
pharmaceutical industry is getting this windfall. Your view of it is that
we are actually offering a darn good drug plan. For seniors it is costing
more.
DR. MCCLELLAN. And I like to go by the numbers and one source
of numbers is our independent actuaries and what they said in their
forecast about national health expenditures which they just made
recently. Just a week ago, they said that their expectations about total
prescription drug spending in this country are now much lower in the
years ahead because of the very aggressive price negotiation and cost
control steps going on in this program, so you have got millions more
seniors getting drugs at a much lower cost, you have got total drug
spending going down. Those seem like pretty good steps.
MR. NORWOOD. Well, we need to make sure everybody understands
this as you gather more and more information. My last minute I have
left, make me feel good about what you are going to do to police the
insurance plans. Just make me feel better.
DR. MCCLELLAN. Well, this has come up a lot and I want to be very
clear that we take our oversight responsibilities very seriously. We have
already implemented a program where we are monitoring the wait times
on the plans call lines for beneficiaries, for pharmacists, and we are
going to do it for-MR. NORWOOD. Are they improving their wait call times?
DR. MCCLELLAN. They have improved significantly. They were
very long in the early part of January with the data problems. They have

93

gotten significantly better. I think there is still room for more progress.
We are also tracking complaints that come in about individual plans.
What we are focusing on right now is fixing each individual complaint as
it arises, but over time, we are going to be able to see patterns and where
we see patterns in plans, plans that are doing a relatively bad job, we
have got further enforcement actions that we can take that go all the way
up to suspending them from the Medicare program.
MR. NORWOOD. How long does it take to get patterns? Five years,
ten years?
DR. MCCLELLAN. We are going to have reports from the plans over
the next several months. We expect that that information will be
available within just a few months.
MR. NORWOOD. Thank you, Mr. Chairman.
MR. DEAL. Ms. Baldwin is recognized for questions.
MS. BALDWIN. Thank you, Mr. Chairman. Some States waded into
the territory of drug benefits prior to the passage of the MMA.
Wisconsin was one of those States, that under a pharmacy plus waiver
initiated a prescription drug plan called Senior Care. The program has
been enormously popular, cost effective, and I would argue very
successful. Upon passage of the MMA, we were very concerned that
Wisconsin might be forced to end Senior Care. I am wondering how it
would interact with the new Part D program and I was very pleased that
the waiver was extended to the year 2007 and I thank you for your efforts
in that regard and that in addition, Senior Care was considered creditable
under Part D.
During the enrollment period for Part D we experienced, in
Wisconsin, a substantial increase in enrollment in Senior Care. It seems
to be one of the preferred plans, 6,000 new enrollees over the past
several months. And what we are finding in terms of our own analysis is
that almost all who qualify for Senior Care in the State of Wisconsin, for
them the benefit is more generous and at a lower cost, so it is very cost
effective for the citizen.
The most frequent request that I get from my constituents, in talking
about all this is please make sure they, that would be you, let us keep
Senior Care into the future and I know that the waiver review process
looks at a wide range of factors, but my constituents have asked me and
frankly, the entire Wisconsin delegation to fight for Senior Care. So I
am asking first off, what assurances can you give me that Wisconsins
seniors, or give me and Wisconsins seniors that Senior Care will
continue beyond the year 2007 and also, how much weight do you place
on issues like customer satisfaction and cost effectiveness in your waiver
review?

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DR. MCCLELLAN.
Well, Congresswoman, first I hope our
commitment to Wisconsins seniors has been evident already from the
fact that we developed the Pharmacy Plus waiver program and approved
the Senior Care program in the first place. Secretary Leavitt worked
very closely with Governor Doyle and with the rest of the delegation.
You are absolutely right. There is a strong commitment from the
Wisconsin delegation to make that program work.
MS. BALDWIN. Everyone sees that 2007 date out there in the future,
so there is so much anxiety.
DR. MCCLELLAN. Well, Congressman Ryan and Congressman
Green, they all have been working very closely with us to make sure that
we keep this program and the people it serves, served effectively. The
arrangement that Governor Doyle worked out with Secretary Leavitt
involved not only continuing the program in this year in its current form,
but also making available a wraparound version, much like the State of
Illinois has done, or other States with Pharmacy Plus waivers have done,
to have it work even more smoothly with the Medicare prescription drug
benefit and we are pleased that that program is continuing now. I am
glad that more people have enrolled in it. There was a big gap, as you
know. That program had been around for a couple of years and only 50
percent or fewer of those who were eligible signed up for it, so I am glad
that we are getting more people enrolled. In the same period of time we
have seen 80,000 people sign up for the Medicare prescription drug plan,
so we also want to make sure that the Senior Care works well directly
with the Medicare prescription drug plan. So we are going to keep up
this close relationship with the Governor and the State to make sure this
happens going forward.
MS. BALDWIN. Well, I know in terms of that negotiation, I guess the
real question is the degree to which this is an incredibly cost-effective
and popular program; creating new demands on it is something that you
just mentioned and discussed, but to what degree is the current success of
the program weighed in the request for an extension beyond 2007
because, you know, just as it is, it is cost-effective, wildly popular for
those who qualify and I would absolutely agree that they set up and
structure the program in a way that not everybody who is 65 and older
qualifies for it, but for those enrolled, it is, you know, again, the benefit
is more generous and at a lower cost to the Federal government.
DR. MCCLELLAN. It is. It has taken, by the way, some time for
those enrollment numbers to get up. Starting in 2002 and you know, as
we are talking about getting more enrollment in the Medicare program,
also a voluntary program, I am pleased that we are kind of running ahead
of the numbers that Senior Care was able to get in its first couple of years
and that we are adding more onto Senior Care now as more people are

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getting coverage through the Medicare drug plans, but we will keep
working together closely just as we have done in Illinois. Illinois had a
Pharmacy Plus waiver, too, where it is now wrapping around the benefit,
saving the State money, working-MS. BALDWIN. Let me just interject because my time has ended. I
do have a follow-up question I will submit in writing about those 2,000
plus Senior Care beneficiaries who were auto-enrolled mistakenly in
another Plan D program.
DR. MCCLELLAN. Absolutely.
MS. BALDWIN. We do want some follow-up on that, thank you.
MR. DEAL. I thank the gentlelady. Dr. Burgess is recognized.
MR. BURGESS. Thank you, Mr. Chairman, and again, Dr. McClellan,
thank you for your forbearance. If it is all right with you, I am going to
take a few questions from the testimony of my constituent, Mr. Song,
who is going to be heard from later, but this is perhaps an opportunity for
him to get his questions answered more quickly.
DR. MCCLELLAN. Sure.
MR. BURGESS. One of the issues he brings up is why has there been
no prompt pay provision within the Medicare plans and why cant there
be an electronic fund transfer so the pharmacies dont have this
extremely long time in their accounts receivable?
DR. MCCLELLAN. Good question. I am concerned about long waits,
particularly if they are waits that werent contemplated in the contract the
pharmacy has with the drug plan. Many plans are paying using
electronic funds transfers. Some are paying by check. I understand that
that is not unusual in the industry. Many drug plans, or many health
insurance plans, pay by check. What we have the authority to do is to
make sure that the drug plans follow their contractual provisions. I want
to be very clear about this. If a pharmacist is not getting paid according
to the contracts, if they are facing undue delays in reaching the plan, we
want to hear about it and we will take further action. We have done that
already. That has brought the wait times way down, and we are seeing
checks going out on a regular basis, payments going out on a regular
basis, so we do want to make sure that those contracts are enforced.
MR. BURGESS. We might consider making electronic fund transfer
just part of any plan that we accept in the future and encouraging those
plans to go on that. What about the issue of drug plans being able to put
a logo on their card?
DR. MCCLELLAN. This is what is called co-branding and we asked
for a comment about this going into 2006 and got some comments back,
but just like a lot of issues with a new plan that people havent
experienced before, I think the experience since then has led people to
change their views and so I think some of the comments that we got in

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2005 would be different than they are in 2006. Looking ahead, we have
put out for comment what we should do with this co-branding approach
in the future. That is out for public comment right now. I am sure we
will hear back from pharmacy groups on this; I already have and I am
sure we will be taking account of those comments as we go forward. We
have already worked with many of the drug plans to have them make
clear that if they do put any logos on their cards, they also communicate
that other pharmacies are in their network and can be used and we are
looking at whether further steps should be taken and that is out for public
comment right now.
MR. BURGESS. Very well. What about standardization of dealing
with formulary denials? Apparently, right now you just get the message
back that a drug is not covered; the pharmacist, perhaps a physicians
office has to get involved to find out why the drug hasnt been covered.
Is there any way to standardize that process so that there can be an
immediate communication of why the drug wasnt covered and the
pharmacist will understand that and know how to remedy the problem?
DR. MCCLELLAN. You know, I have heard from many pharmacists
about this. It reminds me of my own experience in medical practice
where, as you know, different insurers require different forms. There
just is extra work for the health professional. There is a group working
right now, with our backing, made up of representatives from
independent pharmacies, chain pharmacies, and the drug plans to
accomplish just that kind of standardization and they have already made
some real progress. They submitted some new code standardization
ideas to, what is called the NCPDP, that is the standard setting body for
pharmacy transactions. They have already submitted some ideas. I
expect them to do more just in the next few weeks to help make further
progress on this issue. It is a very good idea.
MR. BURGESS. Do you think that would streamline the process?
DR. MCCLELLAN. I do. I think that is going to help make this work
better, but I have got to tell you, I dont want us to just come in and put
out what we think are the right standards. I would rather have the
standards come from leadership from the pharmacies working with the
plans on both what is feasible and what is going to be most effective
from the pharmacies.
MR. BURGESS. And I assume you will hear from the community
pharmacists in that regard, if you havent already?
DR. MCCLELLAN. Absolutely.
MR. BURGESS. Okay. What about the enrollment period where a
patient signs up for a plan on February 28th and March 1st walks in,
presents their card, said I need my stuff? Apparently, that is happening.
Is there any way to make it a reasonable enrollment period?

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DR. MCCLELLAN. Well, the pharmacies have borne the brunt of that
short turnaround. That basic feature is in the statute. We are looking at
what we can do to change that going forward, but that is an area where
we may need to keep talking with you. There have been some ideas
from the plans from us about in the future having more of a delay period
between when a person enrolls and when that enrollment becomes
effective, so that is an issue that we are going to see if we can address. It
is very hard to address in the extreme short term because it requires
systems changes and also there are these potential statutory obstacles in
the way.
What we have done, instead, in the short term, is engage in a broad
education and outreach campaign through our own web site and 1-800MEDICARE number, through working with all the drug plans and
through pharmacies and advocacy groups to let people know that signing
up early in the month provides plenty of time for them to get their card
and have the systems work well when they start using their prescription
drug coverage early the next month, or at least to wait a few weeks. You
know, if you can sign up on your own, if you get your application in,
wait a week or so, you will get a letter back from your plan that gives
you proof of the insurance; wait a few weeks, you will get a drug card. If
you can sign up that far ahead, you have a very high likelihood of having
a good, smooth experience the first time you go in to the pharmacy, so
we are very much stressing those educational messages right now.
MR. BURGESS. Yes. You know that doesnt always work out. Mr.
Chairman, could I ask that we consider having a repeat of this hearing
the first week in May so we can revisit the concept of the May 15th
deadline?
MR. DEAL. I cant make a promise about an exact date for a hearing,
but we will certainly consider it. I think there has been a request from
both sides to do that.
DR. MCCLELLAN. And I will look forward to seeing you again.
MR. DEAL. The gentlemans time is expired. Mr. Pallone.
MR. PALLONE. Thank you, Mr. Chairman. I am going to try to get
some quick answers from you if I can because I have a bunch of
questions. First of all, following up on what was just said about the
prompt payment and the co-branding, because this was a big issue when
I went to visit my pharmacies. Let me just ask you, would you be in
favor of legislation that would require, for example, two weeks prompt
payment for electronic or say, 30 days for, you know, written by check,
and also, on the co-payment, I mean, co-branding? We could simply
prohibit co-branding and have penalties for it. What would you think of
legislation--

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DR. MCCLELLAN. Well, on the first issue, on the timing of payment,

that is something that would require legislation. Under the program, the
pharmacies contract with the drug-MR. PALLONE. Right, but let us assume that I put in the bill, I will
gladly do it, let us say 15 days for electronic, 30 days for written and
prohibit co-branding.
DR. MCCLELLAN. One concern is that some plans are paying on a
faster schedule than that. Some of them are doing 10-day-MR. PALLONE. No, I mean at a minimum.
DR. MCCLELLAN. Well, I am concerned about us putting restrictions
on contracts that may work better.
MR. PALLONE. Well, you are not necessarily in favor of it, then?
DR. MCCLELLAN. Right. On co-branding-MR. PALLONE. Co-branding.
DR. MCCLELLAN. --we are, for the 2007 year, for the next round,
when people are going to have cards printed up and so forth, we have
asked for public comment on whether and how we should change-MR. PALLONE. But you are not in favor of prohibiting it at this
point?
DR. MCCLELLAN. I am not--I dont think we need legislation. I
think we can get input from the pharmacy groups.
MR. PALLONE. Can you do it without legislation?
DR. MCCLELLAN. Yes, and based on that input we will put out
further guidance on what should be-MR. PALLONE. All right. I want to go back to some of the questions
that Mr. Dingell asked you for because I have to be honest with you, this
whole issue with the prior authorization and appeals of formularies, I
think this is going to get worse. I mean, the transition period, I guess,
ends sometime this month and I just think the mass confusion that we
have now, which is out there. I mean, I am not reading it in the
newspaper, I am getting it from my constituents, is only going to get
worse and if we dont have some way to, you know, standardize appeals
of formularies or deal with this prior authorization, I think it is only
going to get worse, so I mean, there was an article in the New York
Times that said one plan had 39 different forms to use for prior
authorization. Do you have any plans to require a standard form for
appeals to minimize this kind of confusion?
DR. MCCLELLAN. Well, I dont want to sound technical, but the
process that the plans go through is asking for an exception. If that
process doesnt get worked out smoothly between the beneficiary and the
plan, they can appeal to Medicare and Medicare does have-MR. PALLONE. But the problem is that people dont even know
about this, Doctor. They dont even know.

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DR. MCCLELLAN. Well, they do. Well, there are lots of places they
can get that information, including from the information the plan sends
them.
MR. PALLONE. Yes, but the drug plans are not adequately notifying
them, believe me.
DR. MCCLELLAN. Let me turn to what we have done to make this-MR. PALLONE. Yes, but I just want to ask you this because I have
got to ask you a couple more things. You dont have any plans to require
a standard form of appeal right now?
DR. MCCLELLAN. We have a model form for exceptions and we are
working right now with plans, pharmacies and physician groups to get an
effective standardized form widely adopted and that is something we will
be looking at and grading the plans on.
MR. PALLONE. But it is not required at this point?
DR. MCCLELLAN. Well, it hasnt been widely adopted at this point
because this is a new program.
MR. PALLONE. Okay.
DR. MCCLELLAN. And we are working with all of these parties-MR. PALLONE. But it is not required? Just yes or no, it is not
required?
DR. MCCLELLAN. It is not required at this point.
MR. PALLONE. Okay.
DR. MCCLELLAN. But many plans are using the model form.
MR. PALLONE. All right, let me give you--I have only got about a
minute and a half. Can CMS provide us some data on the Part D
exceptions and appeals? In other words, can we get the number of
requests for exceptions and appeals under Part D that have been filed, the
types of exceptions and appeals filed, the disposition of those requests? I
have got a whole series of questions.
DR. MCCLELLAN. The plans are required to provide that information
as part of the-MR. PALLONE. But have you collected that data so far?
DR. MCCLELLAN. They will be submitting it to us on a quarterly
basis and after it has come into us and we clean it up, we will make it
available.
MR. PALLONE. Mr. Chairman, if I could just, with your permission,
ask some written questions about that data and whether it could be made
available?
DR. MCCLELLAN. We would be happy to answer your written
questions.
MR. DEAL. Without objection.
MR. PALLONE. All right. Then the last thing. I have to ask you
about New Jersey because, you know, in our State, we are putting out so

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much money and everybody is so concerned because when Governor

Corzine and his staff met with you, I guess, within the last week, you
were unequivocal stating that New Jersey would be made whole in terms
of both dual eligibles as well as our PAAD program, which is our own
New Jersey program, but today we are told that with some of the
Governors staff and with the New Jersey Medicare people, the agency
backed away from some of those statements, so I am concerned about
where we are going and I just wanted to, again, with the Chairmans
permission, if I could give you some written questions about how New
Jersey is going to be reimbursed and whether or not that original
commitment is going to be met or if there is some change.
DR. MCCLELLAN. Well, we have been working very closely with
the State. As you know, the reason why New Jersey has got so many
more claims than just about every other State is that most of those are not
dual eligible beneficiaries. Those beneficiaries are now in their
Medicare plans, are getting-MR. PALLONE. But the impression given, based on the conversation
you had with the Governor in the last few days was that the other people
who are under our State plan that are not dual eligibles, that we would
also be reimbursed for that.
DR. MCCLELLAN. We have, as part of the reimbursement program, a
standard template for paying for, for making sure States are reimbursed
for their dual eligible beneficiaries and for low-income beneficiaries.
New Jersey has some beneficiaries who arent in either of those
categories. For the ones that are enrolled in Medicare drug plans, some
of them arent even enrolled in Medicare drug plans yet, so there is no
way we can pay for them. For the ones that are enrolled, we are going to
try and work with the States, with the State of New Jersey to get those
resolved, too, but that is kind of a unique issue for the State of New
Jersey. It is not something-MR. PALLONE. With the Chairmans permission, if I could just ask
some questions to follow-up on this?
MR. DEAL. The gentleman may submit his questions in writing. I
am going to ask the members if they would try to abide by the time
clock. We have got some members on the second panel that are going to
have to leave and we are not even going to get to their testimony if we
dont speed this process up just a little bit.
MR. PALLONE. Thank you.
MR. DEAL. Mr. Ferguson.
MR. FERGUSON. Thank you, Mr. Chairman. Thank you, Dr.
McClellan, for being here and thanks for your patience and your helping
to wade through so many of these issues and a lot of general questions
have been asked. I want to hone in on a more specific issue, not the

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implementation, generally, but an issue that I think, my understanding is,

could have easily been resolved. It would not have resulted in any
administrative or budgetary burdens. It is a critical healthcare issue to
thousands and thousands of seniors who rely on medication, prescription
medication to raise their good cholesterol in an effort to prevent heart
disease. I just had my physical. My good cholesterol is okay, but it
might not be for the rest of my life, so it is something that obviously all
of us need to be focused on.
The issue concerns reports that CMS is now informing plans that
Part D will not cover Niaspan, which is an important prescription drug.
It was approved by the FDA specifically to reduce the risk of recurrent
heart attacks and to treat dislipodemia. I have a couple of questions and
a couple of assumptions that I want to ask if you could confirm this. A
lot of cardiologists have contacted our office, as well as folks from your
operation, your Deputy Director of Plan Policy and Operations, Gary
Bailey; your Chief Medical Officer, Dr. Kellman; they have
acknowledged that Niaspan has an important place in the treatment of
dislipodemia. Do you agree with the assessment that Niaspan is a
valuable medication to patients?
DR. MCCLELLAN. It is. As you said, that is on the FDA label. What
is also on the FDA labeling is that it is a vitamin, which means that it is
in one of those categories that is excluded.
MR. FERGUSON. I am going to get to that.
DR. MCCLELLAN. Okay.
MR. FERGUSON. Isnt it, in fact, the most effective treatment for
treating, for raising HDL?
DR. MCCLELLAN. Well, there are many effective treatments for
dislipodemia and niacin is, a very effective way to raise HDL for patients
who can tolerate the side effects.
MR. FERGUSON. What other ways can patients reach their HDL
goals without-DR. MCCLELLAN. Dietary change, some of the other medications
that are available, non-vitamin medications that are available by
prescription.
MR. FERGUSON. But for probably literally thousands and thousands
of seniors, this is the best way, would you agree?
DR. MCCLELLAN. This is definitely a treatment that is widely used
by seniors and is very effective in raising HDL.
MR. FERGUSON. Okay. Well, the vast majority of the plan
formularies that were initially approved by CMS covered it and now, you
know, when seniors were deciding which plan to choose, the information
available to them on the CMS formulary finder indicated that this was
covered on many of the plan options and it wouldnt have been

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surprising to patients and their physicians, since it is already covered by

most private insurance plans. All 50 State Medicaid plans cover it.
It has appeared on the formularies for numerous Medicare discount
drug cards and recently, on the web site, your web site, you said that this
is considered now a prescription vitamin, which is excluded because of
its technicality, from definition, for Part Ds definition of a drug. This is
a prescription drug. You cant just go in and buy it off the shelf. You
need a prescription from your doctor to buy this product. It is a
prescription medication. And now the decision, starting June 1 of this
year, that you are actually going to pull coverage; people who currently
have coverage for this under Part D are not going to have their coverage
for this pulled. Is this the final word on this from CMS?
DR. MCCLELLAN. Let me clarify that last point. This is a
prescription vitamin and unfortunately, no matter how many times I ask
them, our general counsel gives me the same answer every time, which is
that the law specifically does not allow Medicare to pay for prescriptionMR. FERGUSON. But it is paying for it now.
DR. MCCLELLAN. And that is why there has been this further
clarification. The plans are not required to drop this from their coverage.
In fact, many plans cover a number of drugs that are excluded; they just
dont get any subsidies from Medicare in doing so. They can provide
discounts, as they did under the discount card. In some cases, they can
even provide some coverage, but it has got to be built into the cost of the
benefit that they are providing, itself. It is not something that we are
allowed, under the law, to provide Medicare subsidies to pay for.
MR. FERGUSON. The American Heart Association, the American
College of Cardiologists, and American Pharmacists Association have
issued alerts warning of very serious health consequences for people if
they dont have coverage for this drug. You are aware of that?
DR. MCCLELLAN. Well, many people didnt have coverage for this
or any other drug before and thanks to the new drug benefit, they have
got it now and they are getting a lot more savings on their other drugs.
That is why seniors, with that $1,100 in average savings are going to be
in a lot better shape to get any drug that they need, including drugs that
are excluded from the Medicare program right now, but this is a statutory
issue.
MR. FERGUSON. So there is, what you are suggesting is there is
absolutely no administrative action that CMS can take to solve this
problem?
DR. MCCLELLAN. I will ask our lawyers again, because I have had a
lot of these conversations already, and I would be delighted to continue
to work with you and your staff to see if we can find a way to resolve

103

this, but from the FDA labeling, it is very clearly a prescription vitamin.
From the statute, vitamins are very clearly excluded from what
Medicare-[The information follows:]
INSERT FOR THE RECORD OF THE HON. MARK MCCLELLAN, ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES
CMS has issued more recent policy clarification regarding prescription Niacin
products. This policy clarification supersedes our February 3, 2006 letter.
The Food and Drug Administration has determined Niaspan and Niacor to be safe
and effective drugs, used therapeutically for the treatment of dyslipidemia, and that they
do not serve as nutritional supplements or address vitamin deficiency. Additionally,
these products are used at dosages much higher than appropriate for nutritional
supplementation. For these reasons, CMS has superseded its initial February 3, 2006
letter and determined that these products should not be considered prescription vitamins
for purposes of Part D coverage. The new policy guidance does not require plans to add
these products to their formularies for 2006. However, for the 2007 contract year,
prescription Niacin products should be considered for formulary inclusion similar to all
other Part D drugs.

MR. FERGUSON. But it is not Vitamin C that I can go buy off the
shelf.
DR. MCCLELLAN. I know.
MR. FERGUSON. You need your doctor to tell you that you need this.
DR. MCCLELLAN. Unfortunately, the statute says vitamin and it
doesnt make a distinction between Vitamin C and niacin.
MR. FERGUSON. Well, it is a very unfortunate technicality for folks
who rely on this for their HDL. Mr. Chairman, I am wrapping up and I
know I am done.
MR. DEAL. The gentlemans time has expired.
MR. FERGUSON. I appreciate the great work you have done on the
implementation of this program. I know this is a vexing issue, but I think
it is a hugely important issue to seniors who need this for raising their-DR. MCCLELLAN. And I want to be clear that the plans can offer
discounts on niacin that people didnt get before. They are offering
discounts on all medications. In many cases they can provide benefits in
this area. We just cant provide a Medicare subsidy for it.
MR. FERGUSON. I would appreciate your looking into it again.
DR. MCCLELLAN. Okay.
MR. DEAL. Ms. Eshoo, you are recognized.
MS. ESHOO. Thank you, Mr. Chairman. And again, I want to urge
you to hold more oversight hearings on this, on a whole variety of issues.
I think that that has come across from both sides of the aisle and I think
that we owe it to the people that we represent to do so. Dr. McClellan, I

104

have several questions. First, how much do you owe the States now on
dual eligibles?
DR. MCCLELLAN. We have not gotten claims from all of the States.
MS. ESHOO. How much do you owe from those that have put in their
claims?
DR. MCCLELLAN. Oh, in many States it is a very low number.
Florida, less than 100; Pennsylvania, less than 5,000 claims so, you
know, a very small amount of dollars.
MS. ESHOO. It is much larger in California that I know of, in terms
of what is being reported.
DR. MCCLELLAN. Yes, that is right and-MS. ESHOO. Do you have enough money in your budget, are you
forecast, did the forecast-DR. MCCLELLAN. We do, because most of these costs are not going
to be additional costs. We are going to reconcile the payments with the
drug plans. These are payments that the drug plans shouldve been
making.
MS. ESHOO. Okay.
DR. MCCLELLAN. And so the drug plan has been very clear.
MS. ESHOO. All right, on to the next question. How many people
have actually electively signed up for Part D?
DR. MCCLELLAN. Completely on their own.
MS. ESHOO. Elected, elected.
DR. MCCLELLAN. Over 5.5 million. There were another more than
five million who elected to join a Medicare Advantage plan, including
many people in your fine district who are now getting more prescription
drug coverage, so millions of people have signed up for plans that
include this-MS. ESHOO. Well, they are not the numbers that have been put out,
generally, in the press. That is why I am asking that because there is a
difference between 25 million and 5.5 and I dont think that is nitpicking,
but I just wanted to hear what you have to say about it. I should have
started out with this observation and I am going to say it. I know that I
am inside the beltway. I have to tell you, I have been here from the very
beginning of this hearing and our discussion here and what is going on
outside of this place are two completely different things, two completely
different things. And if anyone thinks that we are even in the ballpark on
this, I mean, what it says to me more than anything else is that Congress
is not listening.
I mean, there are huge problems out there with people and that is
really quite stunning. I have to say that, and I say that, having sat
through this. This is an almost out-of-body experience today. I dont
wish anyone any ill or harm or anything. I wish that this was something

105

that was really working well and that we had to work through some
wrinkles, because it is large and it is new, but that we would bring people
along. That seems to be the notion that we are operating under here, but
I want to say to Members and to you, Dr. McClellan, that is not what is
going on outside of here. It is a completely different thing. People are
really up in arms about it, so you know, I hope we have a reality check.
Maybe that is what oversight can do, but if we are going to pretend that
we have just got a few things to iron out here, we are really going to miss
the mark with the American people and so on the issue of that enrollment
deadline, I know that Mr. Bilirakis raised it, and said that he would like
to work with you on that. I want to sign on to that.
I think that that enrollment deadline really needs to be stretched and I
think, in many ways, it goes to the heart of one of the larger problems
that people are experiencing, just generally, with the whole plan and they
shouldnt be penalized for that. It is Congress that designed the darn
thing, you know, and if, in fact--this is not insinuating that people arent
sharp enough or good enough or intelligent enough--they really are
having problems with it and I dont think it is fair if they are penalized.
And the penalty accrues, as well, as I understand it, so would you support
that? Did you say that you supported-DR. MCCLELLAN. I said I absolutely want to keep talking with you
about this issue. What, I guess, we are most focused on right now is that
we have seen millions of people find out from-MS. ESHOO. Well, Dr. McClellan-DR. MCCLELLAN. --their plan and we want to make sure that
everyone will take advantage of it as soon as possible.
MS. ESHOO. I really--just a second. Just a second. How many
Medicare beneficiaries are there in the country?
DR. MCCLELLAN. Altogether, over 40 million.
MS. ESHOO. All right. So now, we have had 5.5 million that have
elected to sign up, so now if you want a robust program, you believe in
it, you are administering it, all right?
DR. MCCLELLAN. Right.
MS. ESHOO. Might I suggest to you that we have got a ways to go?
So you know what? If you penalize people, you are chasing them away
from what you are advocating, so I would urge you to think this one
through and all I can do is to suggest that. Secretary Leavitt has
indicated-MR. DEAL. The gentlelady-MS. ESHOO. If I might just finish this one?
MR. DEAL. Okay.
MS. ESHOO. That many of the insurers will drop or some insurers,
he said many, insurers will drop out of the Medicaid program, the

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Medicare program next year. Is there a plan on how to handle the

beneficiaries who would no longer have coverage because their carrier
pulled out?
DR. MCCLELLAN. Yes, there is.
MS. ESHOO. And is there a grace period?
DR. MCCLELLAN. Well, remember that a lot, what I think Secretary
Leavitt was talking about is competition working. Not every one of
these plans, and Chairman Barton mentioned this, as well; not every one
of these plans is equally popular. Many plans have seen a large number-MS. ESHOO. Yes, we have 132 in California.
DR. MCCLELLAN. Some were offered that not many people are
signing up for.
MS. ESHOO. Will there be a grace period or something for people?
DR. MCCLELLAN. Absolutely, and if the plans continue through the
end of the year, as you know, there is another opportunity for people to
choose a plan, maybe a better plan at the end of this year. At that point,
we will have a lot more information about which ones have done well
and which ones have done badly, and probably a lot of people are going
to want to switch plans then, anyway. We will be working to make sure
that everyone knows if their plan is not going to be around.
MS. ESHOO. As long as they are taken care of, that is what I want to
know.
DR. MCCLELLAN. They will have an opportunity-MS. ESHOO. I am still waiting to hear back from you on the
geographic reimbursement adjustment last Thanksgiving.
[The information follows:]
INSERT FOR THE RECORD OF THE HON. MARK MCCLELLAN, ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES
In the proposed physician payment rule for 2005, CMS proposed modifications to
the California GPCIs. This proposal was based on a budget-neutral adjustment to GPCIs
within the state. The California Medical Association rejected that proposal because it did
not provide for new money, which CMS does not hae the authority to provide. The
Association also sent a letter to CMS at that point stating that their prefered resolution
was a legislative change. CMS' approach to intra-state GPCI adjustments has been to
obtain consensus from the members of the state medical association and then implement
changes based on that consensus. The California Medical Association was not able to
achieve consensus on a budget-neutral plan for adjusting their state's GPCIs and CMS is
reluctant to make changes which would take money out of several counties in the state to
the benefit of other counties, if the members of the California Medical Association have
not been able to achieve consensus on that matter. At this point, we understand that the
CMA intends to pursue a legislative fix, rather than attempt to obtain consensus on a
budget-neutral adjustment.

MR. DEAL. Mr. Allen, you are recognized for questions.

107

MR. ALLEN. Thank you, Mr. Chairman. Dr. McClellan, I do have a

bit of Congresswoman Eshoos feeling that this is disconnected in too
many ways from what we are hearing back home. Just to give you one
example, you said that not one plan had removed a drug from its
formulary. We started to get calls on January 20th or 21st, complaints
from people who had signed up for a plan because of a certain drug and
the drug had been removed from the formulary. I am just telling you,
that is part of what we have been hearing, so the plans may not have been
going through the process, but you know, we are getting those kinds of
calls.
DR. MCCLELLAN. If you dont mind just quickly, on this point. This
may be that Niaspan issue that we were discussing earlier where we had
to direct plans that we could not provide financial support for, but that
they are able to continue offering it for a while.
MR. ALLEN. Maybe. A couple of other things I just wanted to
mention. One is your comments about the VA struck me as being a little
bit off base. I mean, my understanding, correct me if I am wrong, the
VA patients have access to all the drugs that are approved by the FDA
and there are some popular drugs for which the VA gets a particularly
good price and those are preferred, but if a doctor wants to or the patient
needs the drug, they can get any drug and that that system is really the
same kind of tiered system that Medicare uses. Am I wrong?
DR. MCCLELLAN. The VA does have a national formulary and you
can get an off-formulary drug if you go through the exceptions and
appeals process, and that is similar to the way the Medicare program
works. What is different is that the Medicare drug plans generally have
broader formularies than the VA. Six out of the top ten drugs arent on
the VA formulary; Medicare plans, in contrast, cover 80 out of the top
hundred and we could have tighter formularies and some plans do. We
dont require that because many beneficiaries-MR. ALLEN. Right. Okay, thank you. I take the point. As long as
we are clear on the difference. You will forgive us, I think, if we have
some skepticism about estimates about cost because the history of this
legislation is one that doesnt provide confidence in the numbers that are
presented on cost and I cant go through all that with you now, but every
time I hear words like the total cost is going to be less than Medicaid, I
start backing off and wondering how that is going to be calculated. The
cost of the entire program, the single thing that is going to determine, as
we go forward over the next year or two, the single component of cost
that may be the major drive here is not about negotiation, it is how many
people sign up for the plan and if people dont sign up for this, for the
Medicare Part D plan, the cost will be lower than projected, but fewer

108

people than expected will be getting their drugs, so the question of how
we evaluate cost, I think, is important.
Our experience, I mean, you were saying the national actuaries were
saying the total expenses will be lower and there will be a $5 billion cost
lower this year. If that just means it is lower because fewer people sign
up for the plans than anticipated, that is not a real savings at all, and I
hope you would separate that in doing your evaluation.
DR. MCCLELLAN. I agree. The estimate is based on no changes in
enrollment assumptions. The change is all because of lower negotiated
prices and lower cost of the benefit.
MR. ALLEN. Lower than anticipated?
DR. MCCLELLAN. Lower than anticipated, that is right.
MR. ALLEN. But not lower, necessarily, than the VA or Medicaid?
DR. MCCLELLAN. Well, again, our actuaries dont think that any of
those other approaches would save any more money.
MR. ALLEN. I understand, but one of your predecessors said that he
would not support a negotiation because if he did that, he would just be
setting prices. The clear implication was the price would be a lot lower
if we negotiated prices. This is one more in a series of questions. I
understand the Administration supports choice, and believes choice and
competition will lower cost.
DR. MCCLELLAN. And it is doing so.
MR. ALLEN. But the Administration opposes allowing seniors to
have a choice that will have a simple, uniform national plan run by
Medicare, dont you?
DR. MCCLELLAN. Well, I havent seen what that proposal is.
MR. ALLEN. That is a yes or no answer.
DR. MCCLELLAN. All of these plans are overseen by Medicare.
MR. ALLEN. I know, I know. But my question is-DR. MCCLELLAN. The last time-MR. ALLEN. Dr. McClellan, my question is simple. You oppose, do
you not, having a national prescription drug plan run by and through
Medicare, not private insurance companies where there would be a
negotiated price?
DR. MCCLELLAN. Yes, because I havent seen an approach to doing
that that could deliver as much drug coverage at as low a cost as what we
are seeing now. The last time-MR. ALLEN. But you dont want people to have that choice. Well,
the bill is H.R. 752.
DR. MCCLELLAN. What does it cost?
MR. ALLEN. So my question to you, beyond that, is real simple.
You support choice, but that choice you are not willing to provide and

109

that is the simplest, cleanest choice available. One plan all across the
country, all Medicare beneficiaries with a formulary set by Medicare.
DR. MCCLELLAN. A national plan with a national formulary would
not give beneficiaries the opportunities for savings and better benefits
that they are getting right now. I would be happy to hear more about
this.
MR. ALLEN. I just havent seen any details of this proposal, how
much it will cost, what it would involve.
DR. MCCLELLAN. All these plans are Medicare plans that we are
overseeing to make sure they meet all-MR. ALLEN. Private insurance company plans that Medicare is
overseeing, right? Private insurance plan.
DR. MCCLELLAN. And just as in previous Democratic proposals,
there would be a privately run PBM or plan.
MR. ALLEN. With all due respect, Dr. McClellan, there are other
proposals and we have had them and they are out there and I am sure
your staff knows about them. Thank you.
MR. DEAL. All right, that concludes the questions from members of
the subcommittee and I thank you for your patience. Dr. McClellan, it is
interesting to me that we are only 60 days into this and it is also obvious
that many adjustments have been made to overcome many of the initial
problems. If we could just get a federally run program to operate as
quickly as the private industry has been able to adapt and make changes,
I think we would all be satisfied. Those of us who have Social Security
beneficiaries who are waiting years for determinations with a
government agency would say we would wish that in 60 days we could
make the kind of adjustments that we have seen the private plans be able
to make. We thank you for your attendance here today.
DR. MCCLELLAN. Thank you and I would just like to say for any
beneficiaries who are watching to let them know that they can call 1-800MEDICARE if they have any questions about what this program means
for them. We can give them some personalized answers so they can take
advantage of it. Thank you.
MR. NORWOOD. Chairman Deal. Chairman Deal.
MR. DEAL. Yes. I would like to ask unanimous consent that we
insert into the record, right at this point, what the actual cost would be,
what the score is on H.R. 752 for the record.
MR. DEAL. Without objection.
[The information follows:]
No cost estimate for H.R. 752 had been received from the Congressional Budget
Office as of the date of printing for the hearing.

110

MR. DEAL. All right, thank you for being here, Dr. McClellan. I
will call the second panel up and as you are coming-MR. ENGEL. Mr. Chairman.
MR. DEAL. Yes.
MR. ENGEL. I am wondering if I could ask unanimous consent to ask
Dr. McClellan a question.
MR. DEAL. Mr. Engel, you are not a member of our subcommittee.
You have not been here for any of the hearing. We have got a second
panel and we are going to lose some of the people if they dont get to
testify because they have got airplanes to catch. I will allow you to ask
questions in writing to Dr. McClellan, as other members have done for
additional questions. I will allow you to ask questions at the conclusion
of the second panel for anyone who is on that panel.
MR. ENGEL. Well, Mr. Chairman, with all due respect, the message
we got from your staff is that I would be allowed to ask questions if I
came in at the end and I was listening. I have been in my office.
MR. DEAL. Mr. Engel, I am not going to get into an argument with
you. As you know, I have extended this courtesy to you in the past on
times when, as today, you have never attended to hear the testimony of
the witnesses. You have never been in the presence of the rest of us who
have listened to the questions and the answers. In the past experience,
your questions have repeated questions that members of the panel have
asked. Now, I have been patient with you in the past, but we have eight
people out here who are waiting to testify. They have been here since
two oclock today and I think, in all due courtesy to everybody, we need
to get on with that second panel.
MR. ENGEL. Well, you know, Mr. Chairman, I have been in
Congress 18 years and I have never, frankly, with all due respect, seen
anyone as discourteous as you acting as a chair.
MR. DEAL. Well, I have been here for 14 years and I have never
seen anybody come in at the last minute and expect, as a non-member of
this subcommittee, to interfere with the rest of the operation.
MR. ENGEL. Mr. Chairman, I am a member of the committee. This
has never been done-MR. DEAL. You are not a member of this subcommittee.
MR. ENGEL.
Well, particularly, when your staff has given
misinformation. I was listening to every minute of this hearing in my
office and I think it is an absolute disgrace, Mr. Chairman.
MR. DEAL. Well, thank you. I am glad you did. Well, I am sorry
that you feel that way.
MR. ENGEL. Well, you dont have to be sorry.
MR. DEAL. If you would take time, and if you would come be with
the rest of us, you would have the opportunity to ask questions.

111

MR. ENGEL. You are disgraceful.

MR. DEAL. We have been here for three hours, we will be glad to
indulge you. Will the second panel please take their seats?
MR. ENGEL. Typical of the way your party runs this House.
MR. DEAL. Once again, thank you all for your patience. It has been
a long day. I know you have had to sit and wait and listen, but we are
pleased that you are here. I am going to introduce you all and then we
will go directly into questions, your testimony, rather. I believe we have
our two lay witnesses who have some time constraints and we are going
to let you two go first, and we will get to you in just a second. First of
all, and my introductions are not going to be in the way you are lined up
the way the name tags are here. Ms. Susan Rawlings, who is President
of Senior Services of WellPoint, Incorporated; Ms. Anne Dennison, who
is a constituent of Dr. Norwood from Hiawasee, Georgia; Mr. Dennis
Song, who is a constituent, I believe, of Dr. Burgess, as has already been
referred to. He is here on behalf of the National Community Pharmacist
Association. Mr. Tom Paul, who is the Chief Pharmacy Officer for
Ovations, United Health Group; Mr. David Lipshutz, who is the Staff
Attorney for California Health Advocates; Mr. Earl Ettienne, is that close
enough? Okay. Who is the Senior Supervisor for CVS Pharmacy and I
believe you are here in the Washington area, is that correct? Ms. Jude
Walsh, who is the Special Assistant to the Governors Office of Health
Policy and Finance in Maine; and Mr. Marcus Hickerson, who is from
Waxahachie, Texas. We are pleased to have you, as well. And we will
do this in a little bit of reverse order and I hope the rest of you will
understand on this. Ms. Dennison, we are going to start with you, if you
would please make your statement.
STATEMENTS OF ANN DENNISON; MARCUS HICKERSON;
DENNIS SONG, FLOWER MOUND HERBAL PHARMACY,
ON BEHALF OF NATIONAL COMMUNITY PHARMACIST
ASSOCIATION; TOM PAUL, CHIEF PHARMACY OFFICER
FOR OVATIONS, UNITED HEALTH GROUP; JUDE E.
WALSH, SPECIAL ASSISTANT, GOVERNORS OFFICE OF
HEALTH POLICY AND FINANCE, STATE OF MAINE;
EARL ETTIENNE, SENIOR RX SUPERVISOR, CVS
PHARMACY; DAVID A. LIPSHUTZ, STAFF ATTORNEY,
CALIFORNIA HEALTH ADVOCATES; AND SUSAN
RAWLINGS,
PRESIDENT,
SENIOR
SERVICES,
WELLPOINT, INC.
MS. DENNISON. Thank you for the opportunity to come before you
and talk to you about the new Medicare prescription drug benefit and

112

what it has done for me. My name is Anne Dennison. I am the daughter
of a pharmacist. I am 72 years old and I live in the north Georgia
mountains in a little town called Hiawasee. I have lived there for 28
years. I love it there. Our community is very tightly knit; it reminds me
of the way communities were in the 1940s during the war. Everyone
looks out for each other. The air and the water are clean and the people
are friendly. Hiawasee is having its sesquicentennial celebration this
March. In fact, it starts this Saturday and you all are invited to come on
down. We would love to have you.
I have raised one son in Hiawasee, the other two were raised
elsewhere. My son, Lewy, is here with me today. Over the years I have
had a few different jobs. I have worked as a cashier, a bartender; I
owned a restaurant, Anns Place, and I also had quite a few health
problems. I have congenital heart disease, diabetes, osteoporosis,
allergies, and I have had bronchial pneumonia four times. I have also
had two thyroid surgeries, one back surgery, and cancer removed from
my tongue. Two different times I have had shunts put in and one of the
biggest peptic ulcers the doctors in South Carolina had ever seen. So as
you can imagine, I take quite a few drugs. I take 14 regular drugs and I
take eight over the counter and from the health food store drugs.
I take Amaryl and Glucophage to control my sugar; a water pill
called, and I cant pronounce it. It is hydro something choro something
zide. That is all I can tell you. I got Synthroid and Amitriptyline for my
thyroid; Digitek, Lipitor and Isosorbide for my heart; Coumadin and
Acupril for my blood pressure; Allegra for my allergies; Actonel for the
osteoporosis; and I carry Nitroquick with me in case of a heart attack.
With the help of my pharmacist, I chose a plan in November. I had
no problems enrolling. I sent my application November 19th and I got a
confirmation that I had coverage November 24th. I chose the AARP plan
because it allows me to continue going to Rite Aid where I have been
going. Also, I am active in the AARP and have used the discount card in
the past.
Before the Part D benefit became a reality, I was paying out of
pocket for my drugs. When I was paying for all of them, it was costing
me over $700 a month. However, for a while I was getting eight of them
for free through the nurse practitioner at my doctors office in Hiawasee.
That brought the cost per month down to around $300 some a month.
My Social Security check is only $560 a month, so if you do the math
you can see what buying the drugs I needed to stay healthy did to me
financially. I would surrender my entire check to the pharmacy and the
shortfall I would put on a credit card. When my sons found out about
this, they began sharing the cost of the drugs.

113

And I have got another page. Excuse me. I have been to the
pharmacy over a half a dozen times since my Part D coverage went into
effect. Not once has the total for my drugs cost me over $10. I pay
between $1 and $5 per prescription. Obviously, this benefit has been a
tremendous blessing for me. I no longer have to rely on my sons for
help. I have paid off the credit card debt I had run up and now I am
thinking about trying to enjoy life a little with the money I have saved.
I appreciate the opportunity to come and tell you about my
experience with Part D and thank you for passing this bill that has made
such a difference in my health and my life.
[The prepared statement of Ann Dennison follows:]
PREPARED STATEMENT OF ANNE DENNISON
Chairman Deal and members of the Committee,
Thank you for the opportunity to come before you and talk about the new Medicare
Prescription Drug benefit and what it has done for me. My name is Ann Dennison. Im
the daughter of a pharmacist. I am 72 years old and live in the North Georgia Mountains
in a little town called Hiawassee. I have lived there for 28 years. I love it there. Our
community is very tightly knit; it reminds me of the way communities were in the 40s
during the War. Everyone looks out for each other. The air and water are clean and the
people are friendly. Hiawassee is having its sesquicentennial celebration this March and
you are all invited to come down.
Ive raised one son in Hiawassee, the other two were raised elsewhere. My son
Lewy is here with me today. Over the years I have had a few different jobs. Ive worked
as a cashier, a bartender and owned my own restaurant, Anns Place. Ive also had quite
a few health problems. I have congenital heart disease, diabetes, osteoporosis, allergies
& bronchial pneumonia. Ive also had two thyroid surgeries, one back surgery, had
cancer removed from my tongue, two shunts put in and one of the biggest peptic ulcers
the doctor in South Carolina had ever seen! So as you can imagine, I take quite a few
drugs. I take Amaryl and Glucophage to control my sugar, a water pill called
Hydrochorothiazide, Synthroid and Amitriptyline for my thyroid, Digitek, Lipitor and
Isosorbide for my heart, Coumadin and Acupril for my blood pressure, Allegra for my
allergies, Actonel for the osteoporosis and I carry Nitroquick with me in case of a heart
attack.
With the help of my pharmacist, I chose a plan in November. I had no problems
enrolling. I chose the AARP plan because it allows me to continue going to Rite-Aid
where I had been going. Also, Im active in the AARP and have used their discount card
in the past.
Before the Part D benefit became a reality, I was paying out of pocket for my drugs.
When I was paying for all of them it was costing me over $700 a month. However, for a
while I was getting eight of them for free through the nurse practitioner at my doctors
office in Hiawassee. That brought the cost per month down to around $300 some
months. My Social Security check is only $560 a month so if you do the math you can
see what buying the drugs I needed to stay healthy did to me financially. I would
surrender my entire check to the pharmacy and the shortfall I would put on a credit card.
When my sons found out about this they began sharing the cost of my drugs.
Ive been to the pharmacy over a half a dozen times since my Part D coverage went
into effect. Not once has the total for my drugs cost me over $10. I pay between one and
five dollars per prescription. Obviously, this benefit has been a tremendous blessing for

114
me. I no longer have to rely on my sons for help, Ive paid off the credit card debt I ran
up and now Im thinking about trying to enjoy life a little with the money Ive saved.
I appreciate the opportunity to come and tell you about my experience with Part D
and thank you for passing this bill that has made such a difference in my health and my
life.

MR. DEAL. Thank you, Ms. Dennison. Thank you for being here.
MS. DENNISON. If you all would please excuse me, and Mr.
Hickerson, we got a plane to catch.
MR. DEAL. I understand that and we are going to get him just as
quick as we can. Ms. Capps, I think, wanted to introduce some of the
panel here.
MS. CAPPS. I have to apologize very strongly for not being able to
stay for this panel and my heart is with you all. Your panel is so
important. I had made a previous engagement and I need to leave, but I
didnt want to do so without saying a word just to thank Mr. Lipshutz,
not just you particularly, but also your volunteers through a program that
we call HICAP. California Health Advocates supports it and it is an
advocate for health insurance counseling and advocacy programs. Its
volunteers are all through the State of California, and they have been
lifesavers. We use them every day, 24/7, really, our constituents use
them, and they have made a real difference during the implementation of
this program and I wanted to mention that, and also the community
pharmacists. You are not from my State, but for all the community
pharmacists across this country right now, we owe a huge debt of
gratitude for getting us through this time.
MS. DENNISON. Ms. Capps, we have a program in Georgia called
Georgia Cares.
MS. CAPPS. It makes a difference, doesnt it?
MS. DENNISON. And it has been great.
MR. DEAL. That is fine. Mr. Hickerson, we will recognize you. If
you will get the microphone and pull it over there where you can be
heard.
MR. HICKERSON. Thank you, Mr. Chairman. Am I coming through?
MR. DEAL. No, you are going to have to push the button.
MR. HICKERSON. Now?
MR. DEAL. Yes.
MR. HICKERSON. Okay, thank you very much, Mr. Chairman,
members of the committee. My name is Marcus Hickerson from
Waxahacie, Texas, which is in Chairman Bartons district, and I am
pleased to have this opportunity to testify today regarding the Medicare
Part D prescription drug plan. Today I want to share with you the
experience that my wife and I had in choosing our prescription drug plan
under Medicare Part D. I have been retired for 17 years from the

115

petroleum refining and real estate industry and my wife and I have been
Medicare Part A and B beneficiaries for 14 years. Let me also add that
my wife and I each take four medications on a regular basis. The cost of
these medications, the list price on those is approximately $5,000 a year.
Now, after receiving the information on the various drug plans that
became available in the fall of 2005, I began comparing Medicareapproved private companies that offered the benefit plans under Part D.
My efforts were focused primarily on Internet research of premiums, copayments, coverage gaps and available drugs covered by plans such as
AARP, Medco, Wellcare, United American, Prescription Solutions,
Aetna, Humana, and others.
My wife and I have, for a number of years, purchased our
prescriptions from Walgreens, which is only a few blocks from our home
and Walgreens made available, off of their web site, a compilation of all
the drugs that we had purchased over the past number of years, so it was
very easy to pull out the drugs that we had purchased for the past 12
months which did, indeed, include the list price of those drugs. So with
that schedule, it made it relatively easy to start comparison on the drug
sites of the various companies.
I found that the web sites, all of these, some 40-odd plans that were
available to those of us in our area of Texas. It was a useful resource and
the information allowed me to reasonably compare the formulary of each
plan and plan the best match for our needs. Although I invested a
considerable amount of time in reviewing the requirements and benefits
associated with each plan, I felt satisfied that I had accessed all the
information I needed to make an informed decision. As far as the
research that I put in, I probably invested some 15 to 20 hours of Internet
time over what perhaps was a two to three week period in making my
review.
It is important to note that we did not select a plan that did not cover
the $250 deductible. In the end, my wife and I selected two different
plans that would best fit our individual medication needs. I estimate that
we will receive joint annual savings of approximately $2,400 a year off
of the list price that were shown in the Walgreen printout. That $200 a
month will come in very nice as far as our overall budget is concerned.
Now, finally, I would like to say that there are two important things
that I would like to share with this committee as far as the program is
concerned. I feel that the key to this new initiative, of course, is choice.
As you can see, from my experience, the options available for my wife
and I to select a specific plan that best fit each of our unique medication
needs was available with a reasonable amount of research. Of course,
one size does certainly not fit all, and that was the case that we found.

116

Now, secondly, I would urge all of the seniors who are eligible, to
sign up in this plan. Before they pick a plan, I would encourage them to
take advantage of the information and resources available to shop around
for a plan that best fits their healthcare needs. Just like shopping for the
best rate on homeowners insurance, mortgages or any other item that we
purchase, the process of selecting a plan is not unlike those that we face
every day. Do I have any complaints? Absolutely none. Do I have a
concern? Yes, I have a concern. Levitra is included in my formulary.
Now, at age 79 I have a concern because my plan allows for a monthly
supply of Levitra to be purchased for a co-payment of $15. My concern,
of course, is that that monthly quota is only four tablets. Now, at 79, I
will wait for another several months before I decide if my concern
becomes a complaint. Thank you, Mr. Chairman. It is good to be with
you today.
[The prepared statement of Marcus Hickerson follows:]
PREPARED STATEMENT OF MARCUS HICKERSON
Good afternoon, Chairman Deal and members of the Committee, my name is
Marcus Hickerson from Waxahachie, Texas, which is in Chairman Bartons District, and
I am pleased to have the opportunity to testify before you today regarding the Medicare
Part - D prescription drug benefit.
Today, I want to share with you the experience that my wife and I had choosing our
prescription drug plan under the new Medicare Part-D program. First, I have been retired
for 17 years from the petroleum refining industry and my wife and I have been Medicare
Part-A and Part-B beneficiaries for 14 years. Let me also add that both my wife and I
currently take four medications each. We spend approximately $5,000 (list price) a year
on these medications.
After receiving initial information from different drug plans in the fall of 2005, I
began comparing Medicare-approved private companies that offered by new Medicare
Part-D plans in my area.
My efforts were focused on internet research of premiums, co-payments, coverage
gaps and available drugs covered by plans such as AARP, Medco, Wellcare, United
American, Prescription Solutions, Aetna and several others.
My wife and I currently fill our prescriptions at Walgreens. Because we fill all our
prescriptions at Walgreens it was very easy for us to compile the list of our respective
medications. It was very important to have this list of medications because that became a
key ingredient to selecting the right Medicare part-D plan. Also, by looking on the
Walgreens website I was able to compare the prices we paid for these medications, which
made it very simple to see how much we would be saving with Medicare.
I found each company website a usehl resource of information that allowed me to
reasonably compare the formulary of each plan and find the best match for both our
needs. Although I invested a considerable amount of time reviewing the requirements and
benefits associated with each plan, I felt satisfied that I had access to all the information I
needed to make an informed decision on the plans we selected.
It is important to note that we did not select a plan that did not cover the annual $250
deductible. In the end, my wife and I selected two different companies that would best fit
our individual medication needs. I estimate that we will receive a joint annual savings of
approximately $2400 off list price.

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Finally, there are two important points that I want to share with the Committee and
with other program eligible seniors. First, I feel that the key to this new initiative is
choice - as you can see from my experience the options available allowed my wife and I
to select a specific plan that best fit each of our unique medication needs. One size does
not fit all and in our case that was certainly true.
Secondly, by comparing the specifics of what each plan offered I was literally able
to shop on-line and select the plan that best met our requirements. Before seniors pick a
plan I encourage them to take advantage of the information and resources available and
shop around for a plan that best fits their healthcare needs. Just like shopping for the best
rate on homeowners insurance or on a mortgage, the process of selecting a plan is not
unlike any purchase we have made throughout our lives.
Thank you Mr. Chairman. I am pleased to respond to any questions that you and the
other Committee Members may have.

MR. DEAL. Thank you very much and we do understand that you
both have to leave. We thank you again for your testimony here today.
Anyone else on the panel that is under a real time press?
CHAIRMAN BARTON. Mr. Chairman, could I just?
MR. DEAL. Yes.
CHAIRMAN BARTON. I want to have the privilege to thank Mr.
Hickerson. He has been a long-time civic leader in the Waxahachie area
and has been very friendly to me over the years. I did not know that he
was going to be a witness until he had already been asked to be a witness
and after the fact, I was asked if it was okay that he had been asked. I
dont want the Members, my friends on the Democrat side, to think we
planted him. I didnt know about him until after he had already been
approved and said he would testify, but I do appreciate him coming up
from Waxahachie. He has done more to help Waxahachie than almost
anybody else in Waxahachie and I think he is a former Citizen of the
Year. I just went to the chamber banquet and I think I saw your name on
that, so we do appreciate you coming and waiting while we saw Dr.
McClellans testimony and then asked him questions.
MR. HICKERSON. Joe, thank you very much and we are proud to be
here to be our representative in Washington.
CHAIRMAN BARTON. Well, I am glad that you are having a positive
experience with your program. Do you think the average senior would
go through the time that you went through to pick a plan? Is that a valid
criticism?
MR. HICKERSON. I certainly would hope so. And there were
occasions when there were organizations in Waxahachie, including
Walgreens, where you could take your medical records down or the
drugs that you use regularly and have a consultation with which of those
plans fit their needs. But I am sorry to say that not too many people use
that information, and I did ask the Walgreen manager how many had
taken advantage. He told me out of our community of 25,000 and county
population of about 130,000, that only 200 had requested that assistance.

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So I think there may be, on the part of a lot of our seniors, just some
indication that they are not terribly concerned about their needs for this
coverage.
CHAIRMAN BARTON. Well, thank you, sir, for coming.
MR. HICKERSON. Good being with you.
CHAIRMAN BARTON. Thank you, Mr. Chairman.
MR. DEAL. Yes, sir. Thank you, Mr. Hickerson. Mr. Song has
indicated that he might also have a time constraint. If the rest of you will
indulge us, we will go to his testimony next.
MR. SONG. Thank you, Mr. Chairman. Chairman Barton and
Chairman Deal, thank you for allowing me to, and the fellow committee
members, thank you for allowing me to share my real life personal
experiences. I was listening to Member Bilirakis and he had made a
point that he said that we should approach this with an open mind and I
believe he said a willingness to learn, and that is how I approach
everything. If you note in my testimony, I own Flower Mound Herbal
Pharmacy, so I deal on the alternative side. And I wish Dr. McClellan
was here because vitamins can improve your health, and they actually
can reduce drug costs and I can prove that every day. But I had been a
chain pharmacist for over 20 years. March the 8th, which is next week, I
will celebrate my eighth year as an independent pharmacy owner. I am a
member of the National Community Pharmacist Association and Texas
Pharmacy Association and a graduate of the University of Texas at
Austin.
To tell you a little bit about myself, my pharmacy is like most family
owned pharmacies. I employ 11 employees. I have over nearly 40,000
patients that come to the pharmacy for their medicines, their dietary
herbal supplements, and their flu shots. We give 6,000 to 8,000 flu shots
per year. In fact, we give more than the county health department. And I
supply a lot of the physicians with their immunizations, too. I also give
advice about the medicines and dietary supplements. I give talks, inservices to school nurses, county health departments, physicians offices,
and kind of established myself as the central prescription drug and
healthcare information center for the community.
One of the things I do that I specialize in is compounding or custom
prescriptions and I want to share just a real anecdote. I make a lot of
prescriptions for pets and you wouldnt believe what some of the pets,
some of the conditions they have. They have conditions like we do; high
blood pressure, high cholesterol, anxiety, depression, psychoses. I made
a preparation for a cat with anxiety that the veterinarian could not get the
cat to take this preparation, so what I did was I went to Sams, bought
StarKist tuna, drained off the water, dissolved the medication in the tuna
and the cat loved it.

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As far as Medicare Part D, I took steps above and beyond to prepare

myself and my staff and also the other pharmacists in my community. I
am the president of the Denton County Pharmacy Association, which is
the county association. I have been that for the last 12 years. So what I
did personally is I hosted an NCPA-sponsored Medicare Part D CE
program for two hours. I required all my staff to listen to a
teleconference, an hour teleconference. We had staff meetings, and we
kind of established ourselves as the point pharmacy in our community
for Medicare Part D questions. Even with all that, I also made
presentations, and I continue to make presentations, to Rotary Clubs, to
senior groups, and to hospital groups. Even with that preparation, the
first two months of this program have been very difficult for me and my
patients.
As a small business owner, it has been a struggle. The problems are
pretty well documented. Primarily, the transfer of information of CMS
to the different health plans; there have been a lot of problems with the
dual eligibles. Dr. Burgess called me about two weeks after it
implemented, about the second week in January and truthfully, anyone
that knows me knows that I will speak the truth and I will be very
upfront and very blunt sometimes, and the first thing that comes out of
my mouth is well, it hasnt been that bad. Then I realized I only have
two dual eligible patients that use me. When they came in, both of them
didnt work. One was because they werent enrolled properly, because
information was transferred improperly. And the other part was our
State is undergoing another transition, too. They are handing their
processing of their prescriptions to a private plan, health plans and there
has been delay of payment there, also.
In fact, one of the pharmacies in Victoria, he owns five pharmacies,
he has an outstanding debt of $170,000 right now that he has been going
into. But I answered Dr. Burgess and I said for me, personally, it hasnt
been that bad, but then I realized I havent really been exposed to that
many of the seniors and it is because what I realize, and my problems
really started the end of January and this month, is because the seniors
stocked up at the very end of the year because they were anticipating
some problems, so they didnt get their refills until just a few weeks ago
and now is where we are experiencing the problems because we are
seeing those recipients come in with their new cards or their new letters.
To give you an example, I have about 50 plans in my region and Mr.
Hickerson talked about choice and I believe there is choice, this is a free
enterprise system, but for an independent pharmacist there is no choice.
There are 50 plans in my area, I have to enroll in every single one of
them and hope that the reimbursement is enough to cover my cost, which
a lot of plans, they are. I can be exclusionary, but then I lose my

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patients, so there is no choice for independent pharmacists. We have to

accept every plan that is out there. And the contracts are not negotiable.
Regardless of what they say, we cannot line item, we cannot change
anything. We accept it or we reject it as is.
I have two pharmacists. One has a retired father that is a pharmacist
in Birmingham, Alabama and they went on the web site. It took them
four hours and they did finally wade through it, but it took two
pharmacists, a retired pharmacist and a practicing pharmacist, to wade
through the web site.
Sometimes the problems we have been
experiencing lately are the hold times. Even though they have gotten
better, we still experience hold times. The plan help desks are still
overloaded. We have, in the past, gotten false rejection codes saying
member not on file, pharmacy not participating. It really turned out to be
a wrong date of birth, maybe a wrong ID number. Since then, that
slowly had been corrected. The prescription claims are going through,
like I had mentioned, the wait time has decreased, but you know, I dont
think it is fair to the Medicare recipients or the community pharmacists
to have up to sometimes one hour wait times, especially when you are
doing 100 to 200 prescriptions a day, which is a fairly low volume for a
pharmacy.
There has been some dialog between NCPA and CMS, and if Dr.
McClellan was here, I would say thank you and especially to Secretary
Leavitt who said all of our, as far as community pharmacists, our efforts
were heroic. We are not heroes. We are very, very compassionate. We
are healthcare providers and the patient is the utmost, the beneficiary is
the utmost important, or the most important person. One of the things I
have done is I have tried to, I have given CE programs to physicians
practices and nurse practitioners, this was the two a couple of years ago
when the prior authorization process really rolled in, to try to explain the
managed care prior authorization process and I always try to approach
everything objectively. I dont try to blame anybody. That doesnt win
in any case.
But I have trouble now trying to explain objectively why their
medications are being switched, or why they are being solicited to being
therapeutically switched and is it due to the rebates? Is it in their best
interest? The PNT committees Dr. McClellan talked about, who are they
comprised of and do they know the specifics of that physicians patient
and is that the best medication for them? There are a lot of drugs in a
therapeutic class, but each one has side effects inherent in characteristics
to each drug, so I believe it is up to the physician, along with the work
with the pharmacist, to select the drug that is most appropriate and safest
for that patient.

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Real quickly, I am going to wrap up by saying that I would like to

share with you a couple stories. I have had one patient that, in the Dallas
morning news about two weeks ago, maybe three weeks ago, there was a
statement from Secretary Leavitt saying that, and it was repeated by Dr.
McClellan as saying our patients should not leave the pharmacy counters
without their prescriptions. The pharmacists have tools to ensure that.
Well, he was a newly diagnosed diabetic. He had just gotten over the
shock of being diabetic, being diagnosed diabetic, had to buy strips, a
blood glucose monitor, and he didnt want to do that.
Then it came to his medications. His plan said he paid $8.50. Well,
he wasnt enrolled in his plan because of some mis-transfer of
information. So after trying to explain to this patient, a newly diagnosed
diabetic, that I couldnt submit his prescription. By the way, that is how
a prescription is adjudicated or a claim is submitted, simultaneously at
the time that you fill a prescription. So it is either make the patient wait,
or you give them the prescription. Anyway, he brought this news article
to me, circled it, and he said, you know, they said that you would take
care of me, you wouldnt let me leave. So there were a couple things,
because I had no confirmation, I didnt even know what process or what
plan he was on. He knew he had it, he knew he submitted it, but what I
basically did is I gave him, for his co-pay, and tried to explain to him, for
the $8.50, this is out of my pocket, $18. And hopefully, we will get it
resolved. Hopefully, the next time you come in it will be covered under
your plan.
The other one was a friend of mine and for the sake of time, and I
dont want to take away from any of the other participants, but we call
ourselves family pharmacists because, you know, all our patients are our
family and that is a big distinction of the independent pharmacist. When
she knew, after countless hours of trying to wade through which plan is
best for that patient, so after countless frustrating hours of trying to select
the best plan for her, and she was on at least eight different medications.
She was a breast cancer survivor and she has been my patient for over 20
years, so she is very near and dear to me and we have a very candid and a
very close relationship. After hours of trying to figure out the best plan
and not finding one out, she told me three things and I would like to
leave with this, and I wish Dr. McClellan was here. She told me thank
you, you are doing your best, and please dont let us seniors down.
With that, the rest of my testimony, I think you have copies of, but in
conclusion, I would just like to say I love being a pharmacist. Most
pharmacists are in this profession because we love taking care of people.
Even despite we want this Medicare system, we know it is a benefit, we
want it to work. Dr. Burgess was kind enough to outline the concerns

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that we have and we are here to help you try to make this work. Thank
you.
[The prepared statement of Dennis Song follows:]
PREPARED STATEMENT OF DENNIS SONG, FLOWER MOUND HERBAL PHARMACY, ON
BEHALF OF NATIONAL COMMUNITY PHARMACIST ASSOCIATION
Good Morning, Chairman Barton, Representative Deal, and members of the
committee. Thank you for conducting this hearing and for providing me the opportunity
to share the experiences with the new Medicare Part D program on behalf of the more
than 24,000 community pharmacies and their patients.
My name is Dennis Song and my family pharmacy is Flower Mound Herbal
Pharmacy in the Dallas-Ft. Worth Metroplex. I have worked in chain pharmacy for the
first 20 years of my career and have owned my pharmacy for 8 years. I am a member of
the Texas Pharmacy Association, the National Community Pharmacists Association, and
a graduate of the University of Texas.
My pharmacy is like most family owned pharmacies.it employs 11 employees and
have nearly 40,000 patients that come to the pharmacy for their medicine, dietary
supplements, their flu shots, and for advice about their medicine. I also have many
doctors, school nurses, and the county health department that utilize my pharmacy for
drug and healthcare information. In a sense my pharmacy acts as the central medication
information center for my community.
I make customized medications for patients pets. For example, just last Tuesday I
made a cat anxiety medicine and drained tuna cans to give it a tuna flavor. I deliver
prescriptions to my patients home if they want me to and I open after hours when
patients need their medicine.
Like most every other pharmacist I know, I prepared for the Medicare Part D benefit
by reading as much as I could and going to programs. I required my staff to attend
educational programs and teleconferences to make sure they were prepared to help
patients. I also gave Medicare Part D talks to the Rotary Club, senior and hospital
groups. Despite my preparation, the first two months of the program have been very
difficult for me as a small business owner and, most importantly, a struggle for my
patients.
The problems have been well documentedthere were problems with the transfer of
patient information between CMS and plans, there were early problems with the
eligibility inquiry system, and there was a lot of confusion among dual eligibles and other
senior patients about which plan they were on and what they needed to do to navigate the
system. At our pharmacyand in thousands of others across the countrywe did what
we could to help patients. There are about 50 plans in my region but we tried to answer as
many questions about plans as we could. Two of the pharmacists that work for me spent
hours on the Medicare website trying to help their parents get enrolled. If it takes a
pharmacist a couple of hours to enroll, theres no way an elderly patient should be
expected to go through a website. Plus, I could count on one hand all of my senior
patients who have a computer. Factor in the indigent, the dual eligibles, and its not
surprising there was so much confusion.
We called plans and were on hold sometimes for close to an hour before we finally
gave up. We did our best to make sure that patients were able to stay on their medication
while we worked through the insurance hassles by giving them emergency supplies of
their prescriptions. During the first couple of weeks, we gave an emergency supply to 20
percent of the elderly patients who came in the pharmacywe want to make sure our
patients dont do without. Last, but not least, we opened up a line of credit at the bank
so we could pay our bills but Ill talk more about that a little later.

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Things have improved in the last few weeks but there are still huge problems for the
patients that will continue if needed changes to the program are not addressed.
Prescription claims are going through much more often than they were but there are still
quite a few that are rejected as unpaidespecially at the first of the month. The wait
times on the phone have decreased but they are still running 5-10 minutes per callbut
much better than an hour. When you are trying to fill two hundred prescriptions a day, it
makes for an unacceptable situation for the pharmacy and for the patient.
My national association, NCPA has told me that there is an ongoing dialogue
between CMS staff and the pharmacies and the CMS advisement increasing the time for
transitional fills to 90 days has helped delay the problems that patients will have when the
plan formularies are enforced. However, I do worry about patients when those
formularies kick in. The pharmacists will have to try to explain to patients and their
caregivers that the blue pill for their heart that they have been taking for years has been
switched to a yellow pill that should do the same thing. That creates serious confusion
and frustration for seniors. On top of that, I always ask myself if that is the best medicine
for my patient. Plans change their formularies all the time depending on who is giving
them the biggest rebate. It concerns me that patients might get confused or just fed up
and stop taking their medicine.
As I mentioned, we try to make sure our patients dont have to do without their
medicine. As an example, I had a newly diagnosed diabetes patient who came in with the
front page of the Dallas Morning News quoting Secretary Leavitt saying that no patient
should leave the pharmacy without their prescription. He had actually circled the quote.
He had enrolled in the plan but the plan had not entered him into his system. We tried to
explain the situation to the patient but he kept referring to the newspaper quote. I wound
up selling the medicine to him for what his co-pay should have been which was $18
below my cost. What made it even worse was that there were two other patientsone
who was another Medicare patient--who walked in and walked out because I was too
busy trying to help the Medicare patient.
I mentioned the line of credit I opened so my pharmacy could pay its bills. One of
the big problems with Medicare Part D is that the payments from the plans are slower and
lower. By slower, I mean that for the dual eligibles, we used to receive payments from
the state Medicaid program every 7 days. Under the new program, we are only supposed
to get paid every 2 to 4 weeks but I have to pay my wholesaler bill weekly.
The plans make it difficult to tell what prescriptions have been submitted and what
have been paid for. Some of the larger plans have also found reasons to delay payment.
The point of the program is not for the plans to make money on the float but for me, its
made cash flow tight. Ive been in business for 8 years and for the first time Ive had to
open a line of credit. Ive almost maxed out the line and now Im afraid my next move is
to go into personal savings to try to cover the costs. Its scary. I know of a few
pharmacies like mine that have already gone out of business over in the Valley in South
Texas and I think there will be many others that will also have to close their doors if
some changes to the program arent made. Why are we being asked to both serve patients
on the front lines and be the bank for the program? Unlike banks we collect zero interest
for the money we are being forced to provide loans.
Some of the changes that I think should be made to the program are:
1)

There needs to be a prompt pay provision.

Electronic Fund Transfers are done everyday with credit cards and banks.
There is no reason why Plans couldnt pay the pharmacy on a daily basis or at
least on a weekly basis. Pharmacies have no ability to negotiate with the
plansthe contracts are take it or leave itso we need CMS to step in and tell
plans that they must pay the pharmacies with a daily EFT.

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2)

The prescription cards that the plans issue should not be allowed to have a
company specific logo on it.
For example, one plan puts the Wal-Mart logo on their card. That seems
outrageous to me and will make some patients think they have to switch
pharmacies. Pharmacists are strictly prohibited from steering patients but the
logo of a chain pharmacy is allowed on a card? Again, we need CMS to tell the
plansnot just recommend--that they cant put a pharmacy logo on a patients
prescription card or there needs to be legislation to correct this situation.
Pull out your social security card. Is there an advertisement on that card?
There should not be any advertising that serves as proof of admission to
Medicare Part D. This is a clear violation of the anti-steering provisions
spelled out in the marketing guidelines issued by CMS.

3)

Patients, doctors, and pharmacies need a standardized method of dealing with

the plan formulary issues.
Right now, if a prescription is not covered, a lot of plans send the
pharmacy a message that says drug not covered. Thats it. No explanation as
to why it was not covered. So, the pharmacy has to call the plan and find out
why the drug is not paid for and what needs to happen to help the patient get
their medication. The pharmacist then has to coordinate the paperwork
between the patient, the doctor, and the pharmacy in order to help the patient
get their medicine. This can take hours or even days. After all that time, the
patient hopefully has not given up on the process and decided not to take their
medicine.
There needs to be standardized messaging between all of the plans when
they communicate with pharmacies and a standardized prior authorization
procedure that reduces the administrative burden on patients, doctors, and
pharmacies.

4)

Enrollment period needs to be realistic

Patients were told that they could enroll as late as the end of the month
and be in the system by the next day. That doesnt happen and is not a realistic
expectation by anyone in the system. The result is that beneficiaries are
frustrated and pharmacy staff have to chase down claims to try to help get the
prescription paid. This unrealistic expectation creates a chain reaction that
upsets the entire benefit. Dual eligible patients should have a deadline of at
least 15 days and non-dual eligibles should have at least 30 days to be entered
into the system.

5)

Standardized Contract Rate

Pharmacies have dozens of plans offering take it or leave it contracts.
Family owned pharmacies have no ability to engage in any form of legitimate
negotiations. As a result we are forced to sign contracts that reimburse us
below our cost. We believe CMS should use its authority to provide
reimbursement guidelines to plans or there needs to be legislation to address the
situation so that pharmacies are able to stay in business and continue to provide
the services I have described here today for the American public.

In conclusion, I would add that I enjoy being a pharmacist and I believe I am

making a difference in the thousands of patients who come in my pharmacies. However,
I am very concerned that the slower and lower Medicare payments this year on top of the
massive Medicaid cuts that Congress passed last month will force thousands of family

125
pharmacies to go out of business and strand millions of patients without access to the
medicine they need to help them stay healthy.
Thank you again for inviting me to share my experiences with the Medicare Part D
program with you.

MR. DEAL. Thank you, Mr. Song. We appreciate what you do and
please convey to your members of your association our appreciation for
what they have done to try to get over these rough spots and I think it
will get better. Mr. Paul, we are going to go to you next and then we will
come back down the line.
MR. PAUL. Thank you, Chairman Deal and other distinguished
members of the Health Subcommittee and honored guests, for the
opportunity to testify before you today about the implementation of the
new Medicare Part D benefit. My name is Tom Paul and I am a
pharmacist and the Chief Pharmacy Officer for Ovations, a United
Health Group business that focuses all its attention on individuals 50 and
older. That population is the primary users of the Medicare and
Medicaid program. Our participation in these programs is really
fundamental to our core mission and that is to facilitate broad and direct
access to affordable, high-quality health care that helps individuals,
families and communities to improve their health and well-being.
Implementing Medicare Part D was and is an enormous and
ambitious endeavor. Clearly, in its early stages the program has
experienced major shortcomings. These shortcomings are a major
concern for all of us, which is why we are here today. I would like to
provide you with a brief overview of our companys efforts around Part
D, and our efforts to resolve some of these initial challenges. I
encourage you to reference my written testimony for further detail.
I am pleased to report that through coordinated efforts of many, we
have seen the beneficiary experience dramatically improve, especially in
comparison to the first weeks when the program began. Through Part D,
many beneficiaries are receiving prescription drug coverage for the first
time. Millions of seniors are seeing real savings on each prescription
they purchase in comparison to prior to January 1st. Moreover, Part D
coverage is providing millions of other beneficiaries a safety net in case
they need to use prescription drug benefits in the future.
Nonetheless, much remains to be done to make sure the program
works successfully for all beneficiaries and most importantly, that those
who need the coverage most are signing up. We are committed to make
sure that the system works as it should for every beneficiary. I should
note that tremendous preparation went into launching the program.
Ovations put significant efforts and resources into technology, enhanced
pharmacist information and support and expansion of and training within
our call centers, and customer service sites.

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Well before January we recognized the need for consumer education

and we launched a broad national consumer program around Part D.
This outreach included events across the country, dissemination of 10
million consumer booklets in multiple languages, and other initiatives
specifically targeting the low-income population. This outreach was
intended to ensure that eligible individuals would understand their
options and know how to access and make full use of the new drug
benefit program that was available to them under Medicare. That said, as
Part D launched, it became very clear that the program was not working
as well for all beneficiaries. Specific problems were caused by
incomplete, inaccurate enrollment and eligibility information received by
the health plans, including delays and that data transfer between CMS,
the health plans, and pharmacies.
Also, a large number of late month enrollments and switches from
one plan to another by duals and other low-income beneficiaries caused
some of the challenges that we experienced. These challenges in
determining eligibility led to difficulties locating enrollees in the system
when they came to the pharmacy. It may have led to temporary
classifications in the standard benefit plan to ensure that there was some
level of coverage for beneficiaries, but it may have resulted in copayments that were higher than expected by that beneficiary. All of this
resulted in an unanticipated surge in call volumes, creating significant
delays in response to both consumers and the pharmacists.
As these challenges arose, we quickly reacted to address them.
Everything we have done has been geared to making sure that no one
leaves the pharmacy without the prescription drugs that they need.
Ovations is doing everything possible to help ensure that these
beneficiaries receive the assistance promised under the Part D program.
More specifically, we worked on multiple fronts to ease the transition of
enrollees and resolve the enrollment and information technology system
issues. We have been working aggressively with CMS, States,
pharmacists, and other partners to ensure that the root cause issues of
inaccurate and untimely eligibility are being resolved.
We have taken numerous steps to ensure that low-income and other
beneficiaries have immediate access to their Part D benefit, but also that
pharmacists are in a position to help these enrollees. My written
testimony details these steps which range from rapid improvements in
our call center operations and significantly enhancing pharmacist support
to developing temporary solutions to meet the needs of low-income
beneficiaries while longer term problems are being resolved.
We continue to see steady improvements across the board. Today
United Health Groups Medicare Part D programs are largely working as
intended for those recipients accessing the program. More than 4.5

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million Medicare beneficiaries are successfully using the stand-alone and

Medicare Advantage prescription drug plans today under Uniteds
programs. More than 60 percent of them are non-duals who voluntarily
enrolled in the Part D program. On average, we are filling more than
eight million prescriptions in each month that we have had the program
in operation.
A very low percentage of claims are now being delayed at the point
of sale as the eligibility and enrollment issues have been resolved. This
means more and more beneficiaries are receiving their ID cards in a
timely manner. Complete billing information is being submitted to their
plan and the pharmacists are getting access to the information that they
need to make the prescription dispensed at the point of service. Finally,
call volumes are down and call wait times have vastly improved since the
program began.
Ultimately, though, the prescription drug program is really not about
an individual plan, it is about the people. And you have heard testimony
today from Ms. Dennison and Mr. Hickerson, but we also have one
person we would like to highlight, Fran Cooper, from Bellevue,
Nebraska. She actually had no intention of joining the Part D plan and
she actually called us to make that known and to tell us why. She was
very opposed to the plan and what it meant, and the challenges she would
face with it. After we talked through the program with her and her
concerns, I am happy to say that she has enrolled in a program. She is
using that program and she is now an advocate for others, telling them of
the value that this program could mean to them.
But just the fact that we have heard from these three individuals and
others that we have heard about today wont satisfy us until the program
works for all beneficiaries that need this important benefit. We continue
to work with CMS toward resolving the enrollment and eligibility and
data issues with the States to address any remaining issues that remain
for the dual eligibles. We also are working with pharmacists to identify
ways to further ease the transition to Part D. You heard that from Dr.
McClellan about plans that are working with the pharmacy associations
in order to make their lives easier through things that we can do via
standardization of the program.
We have intensified our education outreach effort to make sure that
we are reaching those that need to hear more information about the
program. We cant overstate the importance of reaching out to the lower
income populations, particularly those not eligible for Medicaid, to
understand the value that they will receive under Part D. It is important
to answer their questions and remove any barriers to their participation in
the program, and we encourage others to undertake similar efforts. More
effectively managing the beneficiaries expectations around enrollment

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and formularies is a key part of this. Dr. McClellan also spoke of this.
We appreciate the efforts of CMS and Members of Congress to
encourage beneficiaries to enroll or switch plans early in the month.
This will help ensure enrollment is completed by the first of the
following month.
Part D is an ambitious and valuable program that is helping millions
of individuals on a daily basis to purchase the prescription drugs that
they need. This includes many who have previously not had access to
drug coverage, and many more who would not qualified for greater
assistance through other Federal or State programs, including Medicaid.
United Health Group remains committed to working with you, CMS,
States, pharmacists, and beneficiaries to ensure that Part D is working for
all enrollees, especially those who have found the transition to Part D
difficult. We especially appreciate the committees leadership in this
important matter and thank you for the opportunity to share our thoughts.
I would be happy to answer any questions that you might have at the
appropriate time.
[The prepared statement of Tom Paul follows:]
PREPARED STATEMENT OF TOM PAUL, CHIEF PHARMACY OFFICER FOR OVATIONS, UNITED
HEALTH GROUP
Introduction
Thank you Chairman Deal, other distinguished Members of the Health Subcommittee and Honored Guests for the opportunity to testify before you at todays
hearing about the implementation of the new Medicare Part D drug benefit.
My name is Tom Paul and I am Chief Pharmacy Officer, UnitedHealth
Group/Ovations. Ovations is UnitedHealth Groups business that focuses on meeting the
healthcare needs of the over-50 population the very group of Americans who are the
primary users of Medicare. Ovations and the other companies of UnitedHealth Group
have extensive experience providing health care services to the federal government, state
governments and private payers in many types of competitive environments.
Our company has a long-standing commitment to enhancing health care for older
Americans and other Medicare beneficiaries. We are dedicated to helping them address
needs for preventive and acute health care services, manage chronic conditions and
respond to unique and often complex health and well-being issues. Through Ovations
and the rest of our family of businesses, UnitedHealth Group provides the most
comprehensive array of health and well-being services to these populations. We are a
major provider of services through the traditional Medicare fee-for-service program,
health plans, and demonstration projects for the frailest beneficiaries of Medicare.
Together with PacifiCare, we are proud to be one of a handful of companies to offer
Prescription Drug Plans in all 50 states.
Our participation in Medicare programs is fundamental to our core mission: to
facilitate broad and direct access to affordable, high quality health care helping
individuals, families, and communities to improve their health and well-being. Our
commitment is therefore to the beneficiaries, the programs and the taxpayers who support
them, rather than to a specific product offering.

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With this in mind, we believe we can offer a valuable perspective on the new
prescription drug benefit and appreciate the opportunity to testify before this Committee
and to share our experience to date with its implementation.
Early Challenges
Medicare Part D is the most significant change in the Medicare program since its
enactment more than 40 years ago. Implementing a program of such unprecedented size
and scale is an enormous and ambitious endeavor and as we all know, Part D has
experienced some challenges in its early stages. We should note though that the Part D
benefit is currently serving the majority of beneficiaries well. As the Centers for
Medicare & Medicaid Services (CMS) has reported, Medicare Part D plans overall are
now contributing to the well-being of more than 25 million beneficiaries as of February
22nd, including more than 5.3 million beneficiaries who have signed up individually for
prescription drug coverage.
However, we are as concerned as all of you that the system has in some cases not
worked well for all beneficiaries. This is especially true for a minority of low-income and
dually eligible enrollees, largely due to unanticipated information gaps in the system.
Information on eligibility was not available to pharmacies for certain duals and other
low-income beneficiaries in the way it should have been. This was due to:
Incomplete enrollment and eligibility information received by the health plans
and delays in its transfer among CMS, health plans and pharmacies; and
Late-month enrollments and switches from one plan to another by duals and
other low-income beneficiaries leading to delays in posting eligibility
information in the system.
o For example, in the latter half of December, immediately prior to the
January 1 program start date, we were receiving approximately 75,000
applications per day.
The resulting challenges in determining eligibility led to people not being found in
the system or their temporary classification in a standard low-income coverage tier,
making their initial co-payments higher than expected. It also resulted in an
unanticipated surge in call volumes, creating delays in response to both consumers and
pharmacists.
Responding to the Challenges
Since these challenges first came to light at the beginning of this year, our company
has taken quick action on multiple fronts to help enrollees and pharmacists and resolve
the situation, especially as it affects dual eligibles and other low-income individuals. We
have done, and are continuing to do everything we can to work with CMS, states,
pharmacies, and other partners to help resolve outstanding enrollment and information
technology system issues.
Parallel to this, Ovations has taken proactive steps to ensure as smooth a transition
as possible for our enrollees and pharmacists from making rapid improvements in call
center operations and enhancing pharmacist support, to developing temporary solutions
to meet the needs of low-income beneficiaries while longer-term problems are being
resolved. Among the steps we have taken are the following:
We acted quickly to ensure low-income and other beneficiaries would have
immediate access to their Part D benefit regardless of whether they appeared
immediately in the system, by:
o Activating a beneficiarys plan coverage by assuming or deeming an
individuals enrollment even before receiving confirmation of enrollment
from CMS, where possible;
o Assigning beneficiaries to a subsidized co-payment class even in advance
of a CMS confirmation;

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Implementing in coordination with CMS a temporary first fill and
transition plan process that permits new enrollees access to Part D covered
drugs on an expedited basis;
o Making administrative adjustments, such as changing the medication
supply window from 30 to 31 days to assist with claims processing from
Long Term Care pharmacies serving institutionalized beneficiaries;
o Conducting outreach to beneficiaries whose enrollment may not have been
confirmed by CMS in time for the 1st of the month start date (e.g., because
they enrolled or switched plans late in the month) and advising them on
how best to access their benefits early in the month; and
o Lifting on a temporary basis prior authorization and step edit requirements
on almost all medications in order to give pharmacists and enrollees ample
time to adjust to their new Part D plans. We retained prior authorization on
four drugs for which our Pharmacy & Therapeutics Committee has special
safety concerns for older adults.
As I said, at the end of December, Ovations was receiving approximately 75,000
applications a day, and enrollment remains strong, with thousands of applications
continuing to come in each day.
In order to meet the continued strong demand for our program and ensure high
levels of service, we have increased our call center staff significantly.
o We now have more than 3,600 employees deployed at our seven call
centers and continue to increase personnel and improve performance in our
call center operations so that issues can be resolved real time.
o We immediately established a hotline with CMS in the first week of
January for their case workers to escalate enrollee cases and are in constant
communication with CMS to assist beneficiaries.
o We also established a similar hotline for AARP.
o Work is also underway to add two additional call centers to ensure
continued high levels of service, with representatives in these call centers to
be phased in over the next two to three months as they complete training.
o I should note that our customer service representatives receive extensive
ongoing training and daily updates highlighting important issues and how
to resolve them.
We also expeditiously took steps to ensure that the system works more efficiently
for pharmacists:
o We have more than doubled the number of representatives available to
assist pharmacists since January 1st.
o We established a direct hotline for pharmacists to escalate and triage issues
with enrollees, or finalize enrollment if there were application issues all
on the spot where feasible.
o We are providing up-to-date information and support to pharmacists
participating in the program if necessary, on a near-daily basis.
Finally, we are working closely with CMS to identify and address information
gaps and to facilitate reimbursement to states for Part D costs they have borne for
low-income recipients.
On that last point, I want to express our deep appreciation for the steps being taken
by the states to help address gaps in coverage for low-income beneficiaries. We are
committed to seeing that the states are reimbursed in a fair and timely manner for
prescription drugs covered by Medicare Part D.
o

The Results
I am pleased to report that through the coordinated efforts of many, the program is
functioning much better today than in the early weeks of January. I am deeply

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encouraged by the stories I hear every day about people receiving prescription drug
coverage for the first time and about seniors who are keeping more money in their
pockets through the cost savings realized under their new Medicare Part D Plan. Simply
put: the Part D program is delivering real savings to seniors.
At the same time, Part D coverage is providing seniors and others eligible for
Medicare with a safety net in case they ever would need it. The knowledge that they will
be protected if their situations change and their drugs costs rise offers Part D beneficiaries
some peace of mind a truly valuable benefit for older Americans and their families.
By all the data and enrollee accounts, UnitedHealth Groups Medicare Part D programs
are working as intended for most recipients and we continue to see improvement across
the board on a steady basis.
Just two months into the program, we at UnitedHealth Group are proud to report
that more than 4.5 million Medicare beneficiaries have enrolled in and are
successfully using our stand-alone and Medicare Advantage Prescription Drug
Plans.
o About 40% are individuals dually eligible for Medicare and Medicaid (socalled duals or dual eligibles) and other low-income beneficiaries
eligible for a full low-income subsidy.
o This means, in turn, that approximately 60% of our enrollees are non-duals
and voluntarily enrolled in programs offered by UnitedHealth Group.
o Of our duals, nearly a quarter or 25% of these beneficiaries actively
selected and enrolled in a Part D program offered by UnitedHealth Group.
More than 8 million prescriptions are being filled on average through our plans
on a monthly basis by duals and non-duals.
Eligibility and enrollment issues at the pharmacy are no longer a significant
issue, as demonstrated by the very low percentage of claims transactions not
making it through the system due to eligibility or enrollment problems.
Call volumes are down and call wait times are vastly improved for both
beneficiaries and pharmacists since the start of the benefit and even since the
beginning of February.
Enrollment response times from CMS have improved considerably.
o This means more and more beneficiaries are receiving their ID cards before
their participation in the program begins.
o It also means that even if a beneficiary forgets his or her card, complete
billing information for their plan is available to pharmacists the first time
the beneficiary visits the pharmacy.
These are very significant results, which underscore the fact that the Part D benefit
is helping to make affordable prescription drug coverage available to millions of seniors
and disabled individuals, including those who previously would not have qualified for
assistance through other federal or state programs.
How UnitedHealth Group Prepared for Part D
In preparing for the roll-out of Part D and in responding to the initial issues, we
invested millions of dollars and hundreds of thousands of hours in technological
upgrades, consumer outreach and education, enhanced pharmacist information and
support, and expansion of and training in our call centers.
In the course of this preparation, we have been in constant communication and
engaged in intense preparation with CMS, state governments, and members of our
pharmacy network. As an example of this preparation, well before January, we engaged
in a broad national educational campaign about Part D. The goal was to ensure that
individuals eligible for the Part D benefit would understand their options and know how
to access and make full use of the new prescription drug benefits available to them under
Medicare.

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As part of this effort, we developed an educational consumer booklet known as the
Show-Me Guide. We published the Show-Me Guide in seven different languages
(English, Spanish, Chinese, Russian, Vietnamese, Korean, and Tagalog) and distributed
the Guide widely to consumers, providers, advocates, and governmental representatives
at both the state and federal levels.
We conducted and participated in hundreds of community events nationwide to help
people understand Part D. In doing so, we partnered with associations, AARP and other
advocacy groups, community organizations, Members of Congress, state and federal
agencies, retail pharmacies and employer customers. We developed specialized materials
and seminars for low-income populations, pharmacists and doctors, as well as for
constituents of organizations such as the National Kidney Foundation, American
Association of Homes and Services for the Aging, National Association of Chain
Drugstores and the National Hispanic Medical Association.
We also launched two educational websites:
www.MedicareRxInfoSource.com, in July; and
In November www.PartDCentral.com to help families and caregivers of
Medicare beneficiaries.
And in the months prior to the enrollment period we made our call centers available to
anyone who wanted information about Part D.
In another example of our preparatory steps, drawing on our deep experience with
the Medicare population and much additional analysis, Ovations strove to ensure that our
formulary was one of the broadest, most open and non-restrictive. Ovations formulary
as we developed it covers 100% of CMS top 100 volume drugs without requiring prior
authorization. It also is one of the few formularies to include all 178 Part D covered
drugs that the Health and Human Services Inspector General reports as most commonly
used by dual eligibles. And, the Ovations formulary contains just 39 drugs with prior
authorization requirements and five with step therapy requirements. Again, as I said
earlier we temporarily suspended these requirements for all but four drugs in order to
give pharmacists and enrollees ample time to adjust to their new Part D plans.
Under strict guidelines of the Medicare Modernization Act, all plans must review
prior authorization requests as expeditiously as the enrollees health condition requires,
but no later than 72 hours for standard requests. In the rare cases where not taking the
drugs could be life-threatening or raise other clinical concerns, we developed a policy of
dispensing a five-day supply to ensure patient safety. Consumers can also request an
expedited review, which ensures that their claims are resolved within 24 hours.
Ovations practice has always been to only target drugs for prior authorization based on
the drugs potential for inappropriate use, safety, cost, and other similar factors.
Its also worth mentioning that:
We developed the Ovations formulary based on years of experience with senior
and complex populations. As a result, historical data suggests that only 0.2% of
prescription claims are for drugs that would be subject to prior authorization on
the Ovations formulary. Similarly, only 0.5% of claims would be subject to a
step therapy edit based on these historical data.
Ovations does not require prior authorization for common drugs such as those for
Alzheimers disease, and the list of drugs for which Ovations requires prior
authorization is well below the industry average.
All of this is important to understanding why, overall, those who enrolled in
UnitedHealth Groups plans express a high degree of satisfaction. We are excited by the
positive feedback we have been receiving from our enrollees and want to share some of
that with you.
Ultimately, the new Medicare Prescription Drug Benefit is about more than any
individual plan it is about the people.

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It is about people who, before Part D, had no access to affordable prescription drug
coverage. It is about people like Fran Cooper from Bellvue, Nebraska who thought so
little of Part D that she wasnt even going to enroll in a plan. In fact, she called our
offices just to let us know how much she disliked Part D. We were able to show her how
Part D could help her save on her prescription drug costs and make sure she was enrolled
in time to begin realizing those savings on January 1st. And, like many of our members,
we were able to guide her through some of the hurdles she encountered in the programs
opening days.
It is about people like Sarah Blackwell from Auxvasse, Missouri who is now
realizing significant savings on her prescription drug costs thanks to the subsidy Part D
provides for beneficiaries with lower incomes.
And, it also is about people like Georgina Vigilance from Springfield, Virginia who
values the peace of mind that Part D provides to her and her husband. They take only
two prescriptions between them, but know that should their health change they will not
have to worry that the prescriptions that could save their life will be out of their reach.
Still More to Do
Despite the start-up issues, there is a fair amount of good news to talk about with
respect to the Part D program. However, our work to make the program succeed for all
beneficiaries and, very importantly, to ensure that those who need it most are signing up
is by no means finished. We are resolute in our commitment to help deliver on this
promise for all beneficiaries.
To accomplish this we continue to collaborate with CMS to assist the Agency in
resolving enrollment and eligibility data issues that are at the heart of the early Part D
implementation challenges.
We are also working with pharmacies directly and through our industry trade
associations to identify ways to make the transition to Part D easier for pharmacists. For
example, as a group, we are currently looking at standardizing across all plans the
electronic messaging pharmacists receive to address Part D-related administrative issues
(e.g., when a drug is not covered either because it is a Part D excluded drug or is
covered under Medicare Part B).
While the bulk of the enrollment-oriented issues have been addressed or are in the
process of being addressed we are working with states to ensure that any remaining
issues relating to dual eligibles are resolved. We are placing a particular focus on ways
to ensure a smooth transition of duals to Part D going forward as they become dually
eligible and if and as they switch plans.
In addition, we are working with CMS, community organizations, associations and
others to more effectively managed beneficiaries expectations around enrollment and
formulary. On this note, we appreciate the efforts of CMS and Members of Congress to
encourage Medicare beneficiaries to enroll early in the month and avoid late-month
switches in order to ensure that their enrollment is completed by the 1st of the following
month.
As CMS has intensified its educational outreach across the board, we at Ovations are
redoubling our outreach efforts to low-income individuals to encourage them to apply for
subsidies and to join a Part D plan. For example:
We recently launched a new community grassroots outreach campaign in ten
regions across the country to help educate, inform and enroll beneficiaries,
especially low-income individuals.
Our Evercare division, which serves the frail elderly, chronically ill and disabled,
is conducting telephone call-in seminars for beneficiaries who find it hard to get
around and busy adult caregivers. The first event will focus on Medicare Part D
and give participants the opportunity to ask frank questions and gather unbiased
information from a panel of representatives from local and national health

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organizations. It will be held on March 10th for participants in Boston and
Worcester, Massachusetts and the Houston and Harris County areas in Texas.
We intend to expand these targeted beneficiary education efforts in the coming
months and are working with CMS and community-based groups to do so. Since last
summer, we have worked with members of the Congressional Black Caucus to reach out
to Medicare beneficiaries in the communities they represent. We recently met with
leaders of the CBC to discuss ways in which we can intensify this outreach. We also are
following-up with those organizations who requested copies of the Show-Me Guide for
their members, employees, clients or constituents to offer additional educational
assistance. Ten million of those guides were distributed in the course of our education
campaign.
We would encourage others to do the same. The importance of helping lowerincome populations ineligible for Medicaid in particular understand the value of
enrolling, of clarifying their misperceptions and questions and of removing barriers for
them cannot be underestimated. There are an estimated six to eight million low-income
people who should qualify for subsidies under Part D but are not eligible for Medicaid.
These are people, who likely have no prescription drug coverage and can, for the first
time, save significantly over the retail price for their medication. As noted, almost half of
Ovations members are low-income individuals who may not have had any prescription
drug coverage previously.
As we emphasize the importance of encouraging low-income individuals to apply
for subsidies and enroll in Part D, we also want to recognize the important work State
Health Insurance Assistance Programs (SHIPs) play in this regard. Consequently, we
would encourage you to consider increasing the funding made available to support these
organizations so that they can help ensure that beneficiaries especially low-income
individuals are able to easily access the Part D program.
Conclusion
In conclusion, I would like to say that we believe the Medicare prescription drug
program is working for the vast majority of beneficiaries. Enrollees in UnitedHealth
Group/Ovations Medicare Part D plans are realizing significant savings and report a high
degree of satisfaction. And the program overall, as CMS has reported, is delivering
access to medications for most beneficiaries and saving them millions of dollars as a
group.
Clearly, we should and are doing all we can to ensure that Part D is working for all
enrollees especially those for whom the transition to Part D has been difficult. At the
same time, we should recognize that a great number of people are working assiduously to
continue to improve Part Ds implementation. Significant progress has been made on this
front with CMS, states and health plans working to close the information gaps in the
system that were at the heart of the programs early implementation challenges. I want to
stress again that we continue to see improvements in the system. As a sign of these
improvements, over the last half of February, we continued to see decreases in both call
volumes and call wait times. Voluntary enrollment is up sharply as CMS announced
last week. And this is consistent with the trends at Ovations and UnitedHealth Group.
We are encouraged by this progress. We at Ovations and UnitedHealth Group are
committed to working with you, CMS, the states, pharmacists and beneficiaries to
address the current challenges and fulfill the promise of what is an ambitious and
valuable program. We hope that we can be a constructive force to that end and look
forward to working with you in the weeks, months and years to come. We especially
appreciate the Committees leadership on this important matter and thank you for the
opportunity to share our thoughts. I would be happy to answer any questions you might
have for me.

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MR. DEAL. Thank you, Mr. Paul. Ms. Walsh.

MS. WALSH. Chairman Deal, members of the committee, it is an
honor to be here today to speak with you about Maines experience with
the implementation of the Medicare drug benefit. My name is Jude
Walsh and I serve as the Director of Pharmacy Affairs in Maine and
overall responsibility for the implementation of the Medicare benefit in
my State. I would like to begin with some background on Maine, our
experience with the implementation of the Part D benefit, and our
remaining concerns.
There are approximately 45,000 dual eligible individuals enrolled in
the MaineCare Program, Maines Medicaid program. Maine, like many
other States, has invested a tremendous amount of time and effort to
prepare for the safe transfer of its duals to Part D. Part of this
preparation included an analysis of the formularies of all the prescription
drug plans available to our duals. This analysis showed that one out of
every four dual members had been randomly assigned to plans where
less than 60 percent of their drugs were covered and available without
prior authorization. We sought and gained permission from CMS to
intelligently reassign these members to plans that covered 95 percent of
their drugs.
Maines preparation included working closely with our pharmacists.
They alerted us to a potential major problem in late December. They
were concerned that they could not verify Part D eligibility for 40 to 50
percent of their dual clients. This meant that they would not be able to
get the plan to pay for the members prescriptions. In addition, we had
received our MMA file, that is the Medicare file that we get from CMS,
the file that identifies the duals, and this file showed that only four
people out of the 45,000 who are on the file were eligible for low-income
subsidies, when in fact, all 45,000 people should have been, had the
subsidy available to them. These issues prompted our Governor to draft
an urgent letter to Dr. McClellan.
We also set up a toll free hotline that low-income seniors could call
for information about Part D, assisted them with enrollments into plans
and helped people apply for low-income subsidies. The last week of
December, we were averaging 15,000 calls a day from confused seniors.
This call volume was very difficult to manage for a State of Maines size.
This hotline enabled us to quickly respond during the first few days of
January, when thousands of Maines seniors were not able to access their
Federal drug benefit. State staff were monitoring phone lines over the
New Years holiday weekend. On New Years Day we immediately
began hearing about problems. We tried contacting plans and some were
closed or did not answer their phones. Pharmacists were put on hold an

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hour or more and at one point, our largest independent pharmacy had all
13 outgoing lines on hold with plans.
By Tuesday, January 3rd we were up to 18,000 calls from people who
could not get their medications. Some members were being charged a
$250 deductible and over $100 in co-pays. Many were leaving
pharmacies without life sustaining medications. It was chaos, people
were calling nonstop. Many people could not get their medicine. They
were crying and they had nowhere else to turn. The State had to act and
at 11:30 in the morning on the 3rd, the Governor had heard enough. He
instructed us, and I think Maine was the first State in the country, to
restore our pharmacy benefit for these people.
We created an emergency override for pharmacists to bill the State
when duals were being charged excessive co-pays or were being denied
transition coverage of drugs. This also allowed pharmacies to bill us
when nursing homes duals were denied injectable medications like
insulin and cancer medications. To date, we have filled over 115,000
prescriptions for over 50,000 people using this override. We continue to
provide and need this safety net. We still have more than 12 percent of
our members missing their low-income subsidy indicators. We have
spent over $6 million and have asked for an extension to continue this
critically needed safety net through the end of March.
We would like to acknowledge the valiant efforts of CMS staff to
work with us, both over the phone and in person, to address our
concerns. We have seen improvements since the benefit began. Many
more people now have the correct low-income subsidy indicators on their
MMA file. We have benefited from their sound advice on working with
pharmacies to make sure that Part D plans are billed prior to using this
override in billing the State. We appreciate the opportunity to apply for
the Medicare demonstration waiver and the promise of repayment from
CMS.
There are, however, issues with the Medicare Part D benefit that
persist, especially for the dual eligible population. The disparities
between the plans and the number of plans to choose from are confusing
with dual eligibles often auto-assigned into plans where drug formularies
do not match their drug needs. They have mandatory co-pays. In fact,
we have heard that some pharmacies have denied filling medications for
failure to pay co-pays. This Federal flaw has resulted in legislation
pending in Maine that would provide additional co-pay assistance to our
duals.
Their drug benefit is now divided even further with some
medications covered by Medicaid in the form of excluded drugs, some
covered by Medicare Part B, like cancer medications, and the remaining
drugs covered by Part D, none of which is held in a single drug profile,

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creating increased opportunities for the occurrence of adverse events,

drug-to-drug interactions and duplicate therapy. Prior authorization
criteria vary from plan to plan, fair hearing requests take a minimum of
17 days, transitional coverage is inconsistently applied depending on the
plan, and enrollments average six to eight weeks and it is difficult to
administer when members want to move to a new plan.
Maine is also adversely impacted by the clawback. Even with the
Secretarys recent reduction in the clawback amount, we are still being
charged millions of additional dollars for a benefit we had no role in
designing and whose current and future cost we have no influence in
controlling. The clawback is, perhaps, the most accurately named and
least confusing aspect of the Medicare drug benefit. It uniformly
punishes States for effectively controlling prescription drug costs, while
rewarding States that have suffered annual double digit increases due to
inaction.
For the next three years CMS will be using a national trend rate on
prescription drug growth of over 9 percent, when in fact, Maine has been
containing annual drug growth to less than 3 percent. The Federal drug
benefit was not ready January 1st and it is still not ready for everyone
today. We doubt that CMS would have ever allowed a State Medicaid
program to implement a benefit as flawed as this one remains. We
appreciate the enormity of the task before CMS, but urge Congress to act
and fix the Part D benefit, including changing the base year for the
calculation of the clawback and using actual State trend rates instead of
National projections. I thank you for the opportunity to testify and will
be available for questions.
[The prepared statement of Jude Walsh follows:]
PREPARED STATEMENT OF JUDE E. WALSH, SPECIAL ASSISTANT, GOVERNORS OFFICE OF
HEALTH POLICY AND FINANCE, STATE OF MAINE
Chairman Deal, Representatives Brown, Dingell, Barton, and members of the
Committee:
It is an honor to be here today to speak with you about Maines experience with the
implementation of the Medicare Drug Benefit. My name is Jude Walsh and I serve as the
Director of Pharmacy Affairs in Maine and have overall responsibility for the
implementation of the Medicare Drug Benefit in my state.
I would like to begin with some background on Maine, our experience with the
implementation of the Part D benefit and our remaining concerns. There are
approximately 45,000 dual eligible individuals enrolled in the MaineCare Program
Maines Medicaid Program. Maine, like many other states, has invested a tremendous
amount of time and effort to prepare for the safe transfer of its duals to Part D. Part of
this preparation included an analysis of the formularies of all the Prescription Drug Plans
available to our duals. The analysis showed that 1 out of every 4 dual members had been
assigned to plans where less than 60% of their drugs were covered and available without
prior authorization. We sought and gained permission from CMS to intelligently reassign
these members to plans that covered over 95% of their drugs.

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This preparation included working closely with our pharmacists. They alerted us to
a potential major problem in late December. They were concerned that they could not
verify Part D eligibility for 40-50% of their dual clients. This means that they would not
be able to get the plan to pay for that members prescriptions. In addition, we had
received our MMA file the file identifying duals from CMS- that had only 4 people
eligible for low-income subsidies when all 45,000 duals should have had this subsidy
available to them. These issues prompted the Governor to draft an urgent letter to Dr.
McClellan.
We also set up a toll free hotline where low-income seniors could call for
information about Part D, assisted with enrollment into plans and helped people apply for
Low Income Subsidies. The last week of December we were averaging about 15,000
calls a day from confused seniors. This call volume was very difficult to manage for a
state of Maines size. This hotline enabled us to respond quickly during the first few
days of January when thousands of Maine seniors were not able to access their Federal
drug benefit.
State staff were monitoring phone lines over the New Years holiday weekend. On
New Years Day we immediately began hearing about problems. We tried contacting
plans and some were closed or did not answer their phones. Pharmacists were put on
hold an hour or more and at one point our largest independent pharmacy had all 13
outgoing lines on hold with plans.
By Tuesday January 3rd we were up to 18,000 calls from people who could not get
their medications. In some cases they were being charged a $250 deductible and over a
$100 in co pays. Many were leaving pharmacies without life sustaining medications. It
was chaos.
People were calling non-stop. Nobody could get their medicine. They
were crying and they had no place else to turn. The State had to act. At 11:30 am
Tuesday morning the Governor had heard enough. He instructed me to restore our
pharmacy benefit for these people.
We created an emergency override for pharmacists to bill the State when Duals were
being charged excessive co pays or being denied transition coverage. This also allowed
the pharmacies to bill us when nursing home duals were denied injectable drugs like
insulin and cancer medication.
To date we have filled over 115,000 prescriptions for over 50,000 people using this
override. We continue to need this safety net. We still have more than 12% of our
members without Low Income Subsidy indicators working. We have spent over $6
Million dollars and have asked for an extension to continue this critically needed safety
net through the end of March.
There are issues with the Part D benefit that persist, especially for the dual eligible
population. The number and choices of plans is confusing with duals often auto-assigned
into plans with drug formularies not matching their drug needs. They have mandatory co
pays in fact we have heard that some pharmacies have denied filling medications for
failure to pay co pays. This federal flaw has resulted in legislation pending in Maine that
would provide additional co pay assistance. The drug benefit is divided with some
medications covered by Medicaid (excluded drugs), some covered by Medicare Part B
(cancer medications) and the remaining drugs covered by Part D none of which is held
in a single drug profile, creating the opportunity for drug to drug interactions and
duplicate therapy to occur. Prior Authorization criteria vary from plan to plan, fair
hearings requests take a minimum of 17 days, transitional coverage is inconsistently
applied depending on the plan and enrollment averages 6 8 weeks and is difficult to
administer when members attempt to move to a new plan.
We would like to acknowledge the valiant efforts of CMS staff to work with us to
address these concerns. We have seen improvements since the benefit began. We have
taken their advice on working with pharmacies to make sure that Part D plans are billed

139
prior to using our override and billing the State. We appreciate the opportunity to apply
for the Medicare demonstration waiver and the promise of repayment.
Maine is adversely impacted by the clawback. Even with the Secretarys recent
reduction in the clawback amount we still are being charged millions of additional dollars
for a benefit we had no role in designing and whose current and future costs we have no
influence in controlling. The clawback is perhaps the most accurately named and least
confusing aspect of Medicare Drug benefit. It uniformly punishes states for effectively
controlling prescription drug costs while rewarding states that had annual double-digit
increases due to inaction. For the next three years CMS will be using a national trend
rate on prescription drug growth of over 9% when in fact, Maine has been containing
growth to less than 3%.
The federal drug benefit was not ready January 1st and is still not ready for everyone
today. CMS would never have allowed a state Medicaid Program to implement a benefit
as flawed as this one remains. We appreciate the enormity of the task before CMS but
urge Congress to act and fix the Part D benefit including changing the base year for
calculation of the clawback an using actual trend rates instead of projections.
Thank you for the opportunity to testify. I would be happy to answer any questions
you might have.

MR. DEAL. Thank you. Mr. Ettienne.

MR. ETTIENNE. Good job. Thank you. Mr. Chairman, Mr. Allen,
and other members who are present today. My name is Earl Ettienne. I
am a registered pharmacist and the Senior Pharmacy Supervisor for CVS
Pharmacy. I am pleased to appear before you today to provide my
perspectives, as well as that of CVS Pharmacy on the current status of
the implementation of the Medicare Part D prescription drug benefit.
CVS is, indeed, the largest pharmacy provider in the nation with over
5,500 stores in 36 States. Last year we filled in excess of 400 million
prescriptions and had annual sales in excess of $37 billion. In my role as
the Senior Pharmacy Supervisor I am responsible for overseeing the
operations of all CVS pharmacies in the Washington metropolitan area.
For example, I am responsible for assuring that all these pharmacies and
the pharmacists that practice in these stores abide by the highest
standards of professional practice, comply with Federal and State
regulations relating to the practice of pharmacy, and are aware of
important changes in prescription drug benefit programs such as
Medicare Part D.
Without a doubt, the implementation of Medicare Part D created
many challenges for CVS Pharmacy, the millions of beneficiaries that
obtain prescriptions from our pharmacies, as well as the many thousands
of pharmacists that practice in our stores. However, as a large pharmacy
provider, we knew that it was very important to do all that we could to
make this benefit work for the patients and for the pharmacists that we
serve. Our pharmacists have spent countless hours helping seniors better
understand the new Medicare Part D drug benefit. They spend time
educating them about their various plan options, as well as obtaining the
information necessary to accurately fill and bill their prescriptions.

140

Seniors rely on their pharmacists, whether they go to an independent

pharmacy or to a chain pharmacy, to help them with all these tasks.
To that end, I would agree with Secretary Leavitts characterization
recently that said the pharmacists are, indeed, the heroes during the early
stages of this implementation. I noted today that there were several
members who also echo those same sentiments. No doubt that the
beginning of the Medicare Part D program was rough primarily because
pharmacies lacked important beneficiary billing information and co-pay
data on many Medicare beneficiaries that had enrolled or had been
assigned to a Part D plan. This is because many beneficiaries have not
received the data from the plans in which they had been enrolled, nor did
the pharmacies have access to this information through the E1 query
eligibility system early in the program.
Unfortunately, the long initial wait times for the various plans, the
help lines necessary to obtain the necessary billing information slowed
down the prescription filling process for our pharmacists. These long
waits also increased the amount of time that a Medicare beneficiary had
to wait to get their prescription filled. We know that this was particularly
a problem for the dual eligibles that were transferred from Medicaid drug
coverage to Medicare Part D coverage. However, the wait times have
significantly lessened and our pharmacists continue to ensure that
beneficiaries are provided their necessary medications.
We hope that many of the initial system start-up problems are
resolved. We do remain hopeful but concerned about the significant
number of individuals that might enroll just before the May 15th open
enrollment period deadline. Although, since there is a gap of time
between the May 15th deadline and the June 1st enrollment effective date,
we are hopeful that the health plans will have time to be sure that all the
necessary information will be populated in their data fields and members
will have received ID cards and benefit information. I will have more to
say about this just a little later. I also know that many pharmacists found
some Part D plans transition policies to be hard to understand and
difficult to implement. We are working through some of these issues
with CMS and the health plans, but more work needs to be done in that
area.
At this point, I can say that, based on the feedback that I am
receiving from the front line, from the pharmacists, the situation with
Medicare Part D is clearly better as compared to days early in the
program. There still remains several systematic and day-to-day issues
that pharmacists have to deal with and there may be new challenges on
the horizon. For example, we still believe that Congress and HHS must
somehow address the enrollment lag issue and we are very concerned
about how Medicare beneficiaries will react when they find themselves

141

in the coverage gap or the donut hole this summer. We also believe that
there could be a significant log jam at the end of March, which is the end
of the special 90-day transition period.
Millions of beneficiaries will need to either seek an exception in
order to continue on non-formulary drugs that they are taking, or have
their non-formulary medication switched to a formulary drug. This
could create significant problems for physicians, for pharmacists that are
trying to assure that the beneficiaries remain on medications that are
appropriate to treat their medical conditions. We are helping our
pharmacists better understand the exceptions and appeals process so they
can explain it to the Medicare beneficiary, if asked. Plans need to begin
to address these transition issues now before the last week of the month.
Let me talk just briefly about education and training. There have
been many questions in the press about whether pharmacists were
adequately educated and prepared for the many aspects of the Part D
implementation and whether CMS did all that it could to help
pharmacists prepare. In my view, we embraced this task to educate
almost 15,000 plus pharmacists and over 35,000 support personnel
before October 1st about all aspects of Part D, as well as keep them
informed of the many changes that have occurred since then.
Fortunately, we started the process last June through multiple education
modules. We built on the information learned in prior continuing
education programs so that our pharmacists felt comfortable that they
knew what was needed to support our Medicare Part D eligible
customers.
Moreover, not all pharmacies have the same technological
capabilities in their pharmacy computer systems. This may have made it
easier for some pharmacies than others to use some of the new
technology tools that have been put in place to facilitate the
implementation of this benefit. Let me just briefly describe for you some
of the many activities that CVS Pharmacy designed to help the
pharmacists understand Part D and stay updated on the many changes
that have taken place since the start of the program.
We have sponsored multiple continuing education events for our
pharmacists on Part D. These included special online, as well as live
training sessions that began last June. Every pharmacist had to complete
three training sessions online and we carefully tracked each session. We
developed an internal intranet website that is updated regularly with new
information about the Part D benefit as it becomes available. We have
weekly calls to review new updates relating to the Part D benefit in
general, as well as specific issues that pharmacists need to know about
certain Part D plans.

142

New information is coming out every day, from CMS, the States,
and from the plans. It is important for our pharmacists to keep up to date
but frankly, it can be challenging to do so. In my view, pharmacists
understand their important obligation to their patients and are doing the
best they can to keep up with this information overload. CVS also
understands its important corporate role in helping our pharmacists serve
Medicare beneficiaries by offering them a structured way to keep on top
of these changes.
There will be some challenges moving forward. We expect
challenges with the enrollment logs, formulary issues, as well as billing
issues. In the interest of time, my written testimony will cover these in
great detail. In conclusion, we have obviously come a long way since
January 1st, but we have opportunities to make improvements. CVS
Pharmacy is committed to doing all it can to making this benefit work
through education of our pharmacists, outreach to seniors, and
participation in various government and private sector initiatives to
create efficiencies in the delivery of this benefit. We appreciate the
opportunity to provide our views to the subcommittee and we stand
ready and willing to help people live longer, healthier, happier lives.
Thank you.
[The prepared statement of Earl Ettienne follows:]
PREPARED STATEMENT OF EARL ETTIENNE, SENIOR RX SUPERVISOR, CVS PHARMACY
Mr. Chairman and Members of the Subcommittee on Health: I am Earl Ettienne, a
registered pharmacist and Senior Pharmacy Supervisor for CVS Pharmacy. I am pleased
to appear before you today to provide my perspectives and that of CVS Pharmacy on the
current status of the implementation of the Medicare Part D prescription drug benefit
program.
CVS Pharmacy is the largest pharmacy provider in the nation with over 5,500 stores
in 36 states. Last year, we filled over 400 million prescriptions and had annual sales of
$37 billion. In my role as Senior Pharmacy Supervisor, I am responsible for overseeing
the operations of all CVS pharmacies in the Washington, D.C. metropolitan area. For
example, I am responsible for assuring that all these pharmacies and the pharmacists
that practice in these stores abide by the highest standards of professional practice,
comply with Federal and state regulations relating to the practice of pharmacy, and are
aware of important changes in prescription drug benefit programs, such as Medicare Part
D.
Medicare Part D: Past and Present
Without a doubt, implementation of Part D created many challenges for CVS
Pharmacy, the millions of beneficiaries that obtain prescriptions from our pharmacies, as
well as the many thousands of pharmacists that practice in our stores. However, as a
large pharmacy provider, we knew that it was important to do all we could to make the
benefit work for the patients our pharmacists serve.
Our pharmacists have spent countless hours helping seniors better understand the
new Medicare Part D drug benefit, educate them about their various plan options, and
obtain the information necessary to accurately fill and bill their prescriptions. Seniors rely

143
on their pharmacist whether they go to an independent or chain pharmacy to help
them with all these tasks. To that end, I would agree with Secretary Leavitts recent
characterization of pharmacists as being the heroes of the early stages of the
implementation of this benefit.
No doubt that the beginning of Medicare Part D was rough primarily because
pharmacies lacked important beneficiary billing information and copay data on many
Medicare beneficiaries that had enrolled or been assigned to a Part D plan. That is
because many beneficiaries had not received these data from the plans in which they had
been enrolled, nor did pharmacies have access to this information through the E1 query
eligibility system early on in the program.
Unfortunately, the long initial wait times for the various plans help lines to
obtain the necessary billing information slowed down the prescription filling process for
the pharmacist. These long waits also increased the amount of time that a Medicare
beneficiary had to wait to get their prescription filled. We know that this was particularly
a problem for the dual eligibles that were transferred from Medicaid drug coverage to
Medicare Part D coverage. However, the wait times have since significantly lessened
and our pharmacists are continuing to ensure that beneficiaries are provided their
necessary medications.
We hope that many of the initial system start up problems are resolved. We do
remain hopeful but concerned about the significant number of individuals that might
enroll just before the May 15th open enrollment period deadline. Although, since there
is a gap of time between the May 15th deadline and June 1st enrollment effective date, we
are hopeful that the health plans will have time to be sure that all the necessary
information will be populated in their data fields and members will have received their ID
cards and benefit information. I will have more to say about that a little later. I also
know that many pharmacists found some Part D plans transition policies to be hard to
understand and difficult to implement. We are working through some of those issues
with CMS and the health plans, but more work needs to be done in that area.
At this point, I can say that based on the feedback that I am receiving from
pharmacists on the front line in our pharmacies, the situation with Medicare Part D is
clearly better as compared to the early days of the program. There still remain several
systemic and day-to-day issues that pharmacists have to deal with, and there may be new
challenges on the horizon.
For example, we still believe that Congress and HHS must somehow address the
enrollment lag issue, and we are very concerned about how Medicare beneficiaries will
react when they find themselves in the coverage gap or donut hole this summer. We
also believe that there could be a significant logjam at the end of March, which is the
end of the special 90-day transition period. Millions of beneficiaries will need to either
seek an exception in order to continue on the non-formulary drug that they are taking, or
have their non-formulary medication switched to a formulary drug. This could create
significant problems for physicians and pharmacists that are trying to assure that
beneficiaries remain on medications that are appropriate to treat their medical conditions.
We are helping our pharmacists better understand the exceptions and appeals
process so that they can explain it to a Medicare beneficiary if asked. Plans need to begin
to address these transition issues now before the last week of this month.
Education and Training of Pharmacists
There have been many questions in the press about whether pharmacists were
adequately educated and prepared for the many aspects of Part D implementation, and
whether the Centers for Medicare and Medicaid Services (CMS) did all it could to help
pharmacists prepare. In my view, we embraced this task to educate almost 15,000 plus
CVS pharmacists and over 35,000 pharmacy support personnel before October 1st about

144
all aspects of Part D, as well as keep them informed of the many changes that have
occurred since then.
Fortunately, we started this process last June and through multiple educational
modules. We built on the information learned in prior continuing education programs so
that our pharmacists felt comfortable that they knew what was needed to support our
Medicare Part D eligible customers. Moreover, not all pharmacies have the same
technological capabilities in their pharmacy computer systems. This may have made it
easier for some pharmacies than others to use some of the new technology tools that have
been put in place to facilitate the implementation of the benefit.
Let me describe for you some of the many activities that CVS Pharmacy designed to
help our pharmacists understand Part D, and stay updated on the many changes that have
taken place since the start of the program:

CVS sponsored multiple continuing education events for our pharmacists on

Medicare Part D. These included special online and live training sessions that
began last June. Every pharmacist had to complete three training sessions
online, which was carefully checked and tracked;

We developed an internal intranet website that is updated regularly with new

information about the Part D benefit as it becomes available;

We have weekly calls to review new updates relating to the Part D benefit in
general, as well as specific issues that pharmacists need to know about certain
Part D plans.
New information is coming out every day both from CMS, states, and the plans. It
is important for our pharmacists to keep up to date, but frankly it can be challenging to do
so. In my view, pharmacists understand their important obligations to their patients and
are doing the best they can to keep on top of this information overload. CVS also
understands its important corporate role in helping our pharmacists serve Medicare
beneficiaries by offering them a structured way to keep on top of these changes.
Challenges Moving Forward with Part D
Let me touch briefly on some of the challenges that remain with Medicare Part D
implementation. I have already alluded to some of these in my previous remarks, but will
expand on them here:
Enrollment Lag: Congress and the Administration should address this
enrollment lag issue by setting benchmarks that are easily understood. The
key is to insure that the enrollment information and subsidy approval process
must be completed and the results populated into the pharmacy databases.
Additionally, the patient needs to have received their ID card and benefit
information. With that as the guiding principle, you may want to consider a 30day enrollment processing window. However, if plans can complete the process
faster than that, then eligibility would become effective sooner. We suggest that
CMS publish the time it takes on average for health plans to complete the process
above, and let customers use that as a factor in choosing between health plans.
By doing that, I think you will see the marketplace adopt more improved
processes. But more importantly, the customer will experience a positive service
encounter.

Formulary Issues: As you know, each Part D plan has a different drug
formulary, with different cost sharing tiers as well as different drugs covered
under each tier. Many plans are also using cost and utilization management tools
such as prior authorization and step therapy for these formulary drugs. Plans can
also change formulary drugs with 60 days written notice. Some drugs are

145
covered both under Medicare Part B and Medicare Part D, depending on how
they are administered or used. Each plan has a different transition policy.
Keeping current on all this information, as well as staying up to date on any
changes, can be challenging for physicians, pharmacists, and the beneficiaries.
While pharmacies have adapted to dealing with the administrative burdens of
third party prescription plans, we think that these issues will significantly
multiply under Part D programs. Administration of these Part D formularies at
the pharmacy counter will increase costs for pharmacists and slow down the
filling of prescriptions.
We are trying to resolve some of these issues by working with the health plans to
develop standard electronic real time messages that will be sent back to the
pharmacists from the plans. These messages will give more information to the
pharmacist that will help reduce the amount of time that pharmacists may have to
spend in resolving these formulary-related issues.
It would also help tremendously if plans would work directly with beneficiaries
that need to be moved from a non formulary drug to a formulary drug before that
beneficiary returns to the pharmacy counter. This will allow the pharmacist to
spend more time talking to their patients about appropriate use of their drug
therapy, rather than resolving third party administrative problems.
Billing Issues: If the pharmacist does not have accurate billing information, the
pharmacist cannot bill the appropriate Part D plan or charge the appropriate
copay. This situation occurred many times during the early days of the program,
and still presents a problem for the pharmacist as a result of beneficiaries who are
late enrollers or late switchers. Accurate and up to date billing data are the
life blood of the pharmacy billing systems. However, if we can address the
enrollment lag issues I mentioned earlier, this could eliminate many of our
billing concerns. If not corrected, we will continue to have issues with late
enrollers and late switchers.
Moreover, we face continued economic risk from prescriptions that have been
billed in good faith to the Wellpoint POS system. This system was put in place
to be a back stop plan for dual eligibles who had not been auto assigned to a
Part D plan. There was some confusion during the early stages of the program
due to a lack of good billing information for the dual eligibles. We are now
being told that many of these POS claims may have to be reversed and then
rebilled by the pharmacy to another Part D plan or to the Medicaid program.
This just adds another level of complexity, increases our cost to fill Medicare
Part D prescriptions, and potentially puts pharmacies at more economic risk.
Conclusion
We have obviously come a long way Since January 1st, but we have opportunities to
make improvements. CVS Pharmacy is committed to doing all it can to making this
benefit work through education of our pharmacists, outreach to seniors, and participation
in various government and private-sector initiatives to create efficiencies in delivery of
the benefit. We appreciate the opportunity to provide our views to the Subcommittee.
Thank you.

MR. DEAL. Thank you. Mr. Lipshutz.

146

MR. LIPSHULTZ. Good evening, Mr. Chairman, committee members.

Thank you for giving me the opportunity to testify today. My name is
David Lipshutz and I am a Staff Attorney at California Health
Advocates, which is an independent, nonprofit agency that is dedicated
to education and advocacy on behalf of Medicare beneficiaries. We do
this in part by providing technical assistance and training to the network
of local State Health Insurance Programs, or SHIPs, in California known
as HICAP, Health Insurance Counseling and Advocacy Program. Our
experience with the implementation of Medicare Part D is based on large
part with our close work with the HICAPs and other consumer assistance
programs who are on the front line assisting Medicare beneficiaries.
While there are clearly Part D success stories among those that
previously did not have coverage, especially if they qualify for the lowincome subsidy, my focus will be on some of the ongoing problems
many beneficiaries are facing, including problems that wont go away
without serious changes to the programs. The most severe problems
during the implementation of Part D have been felt by those who are
dually eligible for Medicare and Medicaid, all of whom were switched to
a new type of coverage in one day. Many have gone without their
prescription drugs or have had to pay out of pocket.
Without States intervening to provide temporary emergency
coverage, the crisis would be much worse. In California we have
approximately one million dual eligibles. As of about last Thursday, the
State of California had paid for over 300,000 prescription drugs for over
170,000 individuals. From what we have seen so far in California and
we believe elsewhere, dual eligibles are worse off under Medicare Part D
due to several reasons. In part, due to the breadth of the coverage,
protections, and appeals, and new out-of-pocket costs that are simply out
of their reach.
Linda, a client of the Health Consumer Alliance Program in San
Diego, is a typical example. She is a dual eligible earning $842 a month.
She takes about 30 medications. She says she cannot afford the co-pays
and will be out of money for food by the end of the month. Many
ongoing problems faced by dual eligibles, as I will briefly outline, impact
all Medicare beneficiaries.
The first challenge for any beneficiary is trying to understand and
use the complex new Part D benefit. The analysis of whether or not to
enroll in a particular plan does not end at whether a drug is covered; a
beneficiary must find out at what cost. The tier placement of a drug can
mean the difference in paying a set co-pay of a few dollars per month or
a large percentage for a very costly drug. Utilization management tools
that are applied to covered drugs, such as prior authorization, may bring
down plan costs, but they also serve as a barrier to getting drugs.

147

At best, information regarding utilization management is difficult to

obtain from the plans. We have seen utilization management used in
very restrictive ways, effectively denying medications for enrollees,
including medications that people have already been stabilized on. I
would like to put forth the example of Mr. H., a 23 year old Medicare
beneficiary in El Dorado County who was stabilized on an anti-psychotic
drug prior to joining the Part D plan in January. Although his new plan
covered his drug, as it is amongst one of the required categories, the plan
did not allow for the amount and quantity prescribed by his treating
psychiatrist. Mr. Hs family contacted his plan in early January and his
psychiatrist wrote two separate requests to the plan to cover his drug in
the requested dosage amount. The local HICAP program later
intervened toward the end of the month, a plan representative explained
that the plan had not responded because the physician had not used the
correct form. Mr. H. changed plans in February.
Information about transition plans, which are meant to give a first fill
of non-formulary drugs to new enrollees, has also been difficult to obtain
and to access. Enrollees who are able to get their transition supply are
not getting the notices they need to take directions and to take the next
affirmative steps. This will be an ongoing issue as people either become
newly eligible for Part D or change plans and find that their plans do not
cover the drugs that they need. California is a culturally rich and diverse
State. Non-English speaking beneficiaries are not being well served by
Part D plans in California. One of our staff members in Sacramento who
helped over 300 Spanish speaking Medicare beneficiaries in the last few
months listened as her clients explained that their plans either have no or
limited bilingual staff or had a Spanish language voice mail where
messages were left but unreturned for weeks. Problems, of course, are
worse for people who speak languages other than Spanish.
Some rural counties in northern California have only one local
pharmacy that contracts with only one Part D plan, one that is about the
benchmark for dual eligibles and others with the low-income subsidy.
Plans have a wide discretion in how they design their exceptions process
including the form of request and the level and type of medical evidence
a supporting physician must provide. Many doctors whose participation
is critical for beneficiaries report that they do not want to participate in
this process because it is too burdensome for them.
In addition to these ongoing issues, we are not out of the woods yet.
There is a pending crisis once State emergency drug coverage runs out
for dual eligibles and when those who have been able to access transition
first fills find that their drugs are not covered. This will be felt most,
perhaps, by Part D enrollees who will be locked into their plans.
Medicare beneficiaries deserve a prescription drug benefit they can

148

understand and easily access. While some individuals are successfully

getting their prescriptions filled, many problems encountered by Part D
enrollees will not go away without further attention and intervention.
Thank you for the opportunity to provide these comments.
[The prepared statement of David Lipshutz follows:]
PREPARED STATEMENT OF DAVID A. LIPSHUTZ, STAFF ATTORNEY, CALIFORNIA HEALTH
ADVOCATES
I. INTRODUCTION
California Health Advocates (CHA) is an independent, non-profit organization
dedicated to education and advocacy efforts on behalf of Medicare beneficiaries in
California. Separate and apart from the State Health Insurance Program (SHIP), we do
this in part by providing support, including technical assistance and training, to the
network
of
Californias
Health
Insurance
Counseling
and Advocacy
Programs (HICAPs) with which the SHIP contracts to assist Californias Medicare
beneficiaries and their families. CHA also provides statewide technical training and
support to social and legal services agencies and other professionals helping Californians
with questions about Medicare. Our experience with the implementation of Medicare
Part D is based in large part on our close work with the HICAPs and other consumer
assistance programs that are on the front line assisting Medicare beneficiaries.
It is clear that the new Part D prescription drug benefit can provide needed
prescription drug coverage for those who previously had none, and individuals eligible
for the low-income subsidy (LIS) will receive the new benefit at very little cost. But the
first two months of the program demonstrates many of the structural defects in the design
of the new program that relies solely on commercial companies to provide the new
benefit in widely varying ways. By Secretary Leavitts own admission, the roll-out of
Medicare Part D has been a difficult transition and, although the Centers for Medicare
and Medicaid Services (CMS) has worked hard to make some incremental improvements,
many problems with Part D will not go away due to flaws in the basic design of the
benefit and its operation. In this written testimony, we first describe the problems Part D
enrollees now face and will continue to face as the Part D program progresses.
Secondly, we use our experience with current implementation problems to analyze
broader structural flaws with Part D and propose some recommendations to make the
benefit work better for all beneficiaries.
II. IMPLEMENTATION OF MEDICARE PART D -- ONGOING PROBLEMS
FOR BENEFICIARIES
As widely reported by Medicare beneficiaries, advocates, pharmacies, physicians
and the media, there have been myriad problems with the implementation of Part D.
While many individuals are getting their prescription drugs, and some improvements
have been made to correct problems in regard to data issues and Part D plan phone
accessibility, beneficiaries still face numerous problems that will not get better without
fundamental changes made to the way the program is designed and administered.
Without addressing the issues outlined below, Medicare beneficiaries will continue to
face problems navigating Part D and getting the medications they need at the lowest cost.
Overview
The HICAP network and other advocates around the country report that their clients
are overwhelmed by the sheer number of choices and complexity of Part D plans. Some
were auto assigned to a plan without regard to their pharmaceutical needs while others
were faced with the complexity of choosing a plan from dozens of different designs.
Once in a plan many have been unable to obtain their prescription drugs or have had to

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pay full retail prices when their subsidy status was inaccurately recorded by CMS or the
plan. Advocates report that those who are dually eligible encounter the most dire
problems, but many of these problems can and do affect Medicare beneficiaries
regardless of their economic status.
Over 6 million dual eligibles had their drug coverage switched on a single day from
Medicaid to Medicare, resulting in massive systems failures at the pharmacy level, the
plan level, at 1-800-MEDICARE and the Medicare website. The sheer volume of dual
eligibles, combined with their generally poorer health status and inability to pay for their
own medications, swamped the resources of most local programs designed to help
Medicare beneficiaries navigate this new benefit. Many Part D enrollees simply did not
get their prescription drugs, and continue to experience difficulty due to a number of
problems, including:
CMS and contractors databases fail to reflect correct eligibility status.
Consumers, advocates, and pharmacists are unable to get through to Part D
plans.
When reached, 1-800-MEDICARE and Part D plan customer service
representatives are often unable to provide accurate information.
Dual eligibles were auto-assigned to Part D plans without regard to their
pharmaceutical needs or their ability to pay premiums for Medicare Part A and
B benefits in MA-PD plans.
CMS "backup" point of service system (Anthem/Wellpoint) fails to provide
prescription drugs to dually eligible beneficiaries.
Widespread system failures result in pharmacies charging the wrong costsharing for drugs, causing duals to go without critical medications when they
are unable to pay.
Part D plans and contracting pharmacies fail to honor transition plan "first fill"
obligations, and
Consumers of all economic circumstances are unable to file exceptions and
appeals with Part D plans to get the drugs they need.
Understanding the Benefit
California HICAP counselors and their counterparts nationwide have been working
tirelessly to help educate Medicare beneficiaries about the new Part D benefit and assist
them in exploring their enrollment options. In addition to the unprecedented volume of
demand for their services, the nature and structure of the Part D benefit injects a level of
complexity that requires significantly more time, effort and expertise in counseling each
consumer. Program managers estimate that most people choosing a plan require several
hours of counseling time and often multiple counseling sessions (each of several hours in
length) to collect information about their drug usage and research plans that cover those
drugs at an affordable copayment and at the pharmacy of their choice.
The sheer number of drug plans available presents an overwhelming choice for most
beneficiaries. Each plan differs in structure, benefits, and costs and some are sold by
multiple entities under co-branding agreements with the plan sponsor. One Part D
sponsors product in California, for example, is being sold (or co-branded) by 14
different insurance companies; another sponsor co-brands with 12 different companies.
In California, 18 sponsors offer 47 stand-alone prescription drug plans (PDPs). In
addition, beneficiaries can also choose from varying numbers of Medicare Advantage
plans, both with and without prescription drug benefits. In Los Angeles, for example,
there are approximately 70 different PDPs and MA plans from which to choose. Tiered
formularies, utilization management tools (such as prior authorization) and price
differences between contracting pharmacy networks further complicate the decisionmaking process. In addition, this information is not always available and accurate on the
Medicare website.

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Medicare beneficiaries are unable to differentiate between PDPs and the various MA
plans such as HMOs, PPOs, Private Fee for Service Plans, and Special Needs Plans.
Some MA plans include prescription drugs (MA-PDs) in their package of Medicare Part
A and B services and others dont. Consumers are understandably baffled by the
complexity and number of choices and cant be expected to understand the myriad of
details necessary to choose the most appropriate plan for their needs.
Enrollment and Eligibility Issues
Unlike enrollment into Medicare Parts A and B, which is handled by the Social
Security Administration, individuals must choose a Part D plan from a vast array of
choices and purchase a particular Part D plan in order to get the new prescription drug
benefit. Computer exchanges of data between Part D plans, the Centers for Medicare and
Medicaid Services (CMS) and its contractors complicate beneficiary enrollment and
disenrollment and lead to gaps in coverage. Multiple levels of communication and data
exchanges must occur before medications can be dispensed by a pharmacy contracted
with a Part D plan.
The pharmacist must electronically query the plan to determine whether a
beneficiary is enrolled in that plan, whether the drug is on the plans formulary, whether a
deductible applies, and what copayment responsibility exists for the particular drug
covered by the plan. If that data is not readily available the pharmacist must phone the
plan to obtain this information. The plan cannot confirm the beneficiarys enrollment and
copayment responsibility with the pharmacy until CMS has confirmed the beneficiary
enrollment and subsidy status, and whether the person is enrolled in another plan or
covered by an employer plan receiving the federal subsidy for employers. Any data flaw
along this chain will result in medications being withheld or beneficiaries paying the
wrong price, if they can afford it, for their medications.
Data flaws affect all Medicare beneficiaries regardless of their status, but they affect
those who are dually eligible for Medicare and Medi-Cal (Medicaid) most acutely. While
both consumer advocates and Californias state Medicaid Agency (Department of Health
Services - DHS) report incremental improvements in CMS data systems reflecting
eligibility and enrollment, there are continuing data problems that lead to gaps in
coverage for dual eligibles. The current back-up system for dual eligibles who are not
assigned to a plan the Point of Sale system run by Anthem/Wellpoint allows many
duals to fall through the cracks. Instead, they must rely on the states temporary
emergency funding in order to obtain their prescription drugs. Unless California takes
further action, however, this emergency funding will run out in a matter of weeks,
possibly months. More than half of all states have had to assume responsibility for the
poorest of their residents to make up for the failures of the national program.
According to the state Department of Health Services, an estimated 10,000
Californians will become dually eligible for Medicare and Medi-Cal each month, thus
becoming a dual for the purposes of Part D benefits only. DHS anticipates that despite
current efforts to alleviate data problems, there will be ongoing delays in CMS autoenrollment of these individuals into a Part D plan. Other states will have the same,
chronic problem transitioning dual eligibles from their state Medicaid program to
Medicare for their prescription drug coverage.
In addition, there will continue to be delays in eligibility information when dual
eligibles or any other Part D enrollee during a permissible enrollment period first
enroll in a plan or exercise their right to change plans. Enrolling in or changing drug
plans requires complex data exchanges between the old plan, CMS, the new plan, and the
plans contractors and sub-contractors. This information can take many days or several
weeks to be accurately displayed in the system. Changes made toward the end of the
month often will not show up in the system until later the following month, making it

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difficult to obtain drugs in the early part of the month after enrolling in or switching
plans.
In late 2005, HICAPs and other Medicare counselors helped numerous dual eligibles
analyze their auto-assigned plans and find other plans that better suited their individual
needs. These duals who did their homework however, were penalized in January when
they found that their records were in chaos; the Anthem/Wellpoint POS system failed and
did not help them.
Example: Helen, age 86, a dual eligible of Humboldt County, changed her autoassigned plan on December 15th to one that better suited her drug needs. In
January, her new plan had no record of her enrollment in the plan or her status as a
dual eligible. She went 3 weeks without her medications because she could not
afford to pay for them, until she was able to obtain emergency coverage through the
state. She did not receive her new plans enrollment card until February 10th.
Example: Dorothy, a Medicare beneficiary from the central coast of California,
chose an AARP Part D plan in early November 2005, but days later informed them
that she no longer wanted this coverage. Despite confirmation of her request from
AARP at the time, Dorothy has had the AARP Part D premiums deducted from her
Social Security check for both January and February and it is not clear when that
deduction will end or when those premiums will be refunded.
Low Income Subsidy (LIS)
In addition to problems with eligibility and enrollment data, many HICAPs and
other consumer assistance programs report that there are still widespread problems with
data available to pharmacies and plans that accurately reflect individuals LIS eligibility
status and the correct amount of their prescription drug copayment. This problem is most
acute when an enrollee switches plans or enrolls in a Part D plan for the first time,
leading to LIS enrollees being charged inappropriate copayment amounts. This problem
occurs for all LIS enrollees not just dual eligibles.
Example: Mildred, age 86, a dual eligible resident of Del Norte County, changed
her auto-assigned plan in December 2005 to one that better met her drug needs. Her
eligibility information for the LIS, however, did not follow, and she had to pay
approximately 15% of her income on drugs. After 10 phone calls to various entities
by the local HICAP, she found that she must wait 6-8 weeks for reimbursement
from her plan.
Transition Processes
Despite CMS request to Part D plans that they extend their transition first fill
coverage of non-formulary drugs through March, HICAPs report that many Medicare
beneficiaries are unable to access such coverage due to lack of information about
transition policies at Part D contracting pharmacies and/or the unwillingness of
pharmacies to provide such supplies.
Information about these transition processes have been extremely difficult to obtain
through the plans; this issue is a recurring one and people will continually become newly
eligible for Part D and will find that their new plan does not cover the drugs they are
currently taking. The transition process is meant to allow an enrollee to request an
exception so that his/her non-formulary drug can be covered or to change drugs or drug
plans. Many beneficiaries who have been given a transitional supply of non-formulary
drugs, however, are not receiving notices from plans and contracting pharmacies

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informing them what they should do next (e.g., talk with their doctors about alternate
drugs, file an exception request, or change plans).
Language Access
CMS standards require Part D call centers to accommodate non-English speaking
beneficiaries. Based upon reports from HICAPs and other advocates, however, nonEnglish speakers in California, a culturally and linguistically diverse state, are not being
accommodated.
In our agencys Sacramento office, we answer phone calls from Medicare
beneficiaries that for whatever reason are not appropriately routed to their local HICAP
program. One of our staff members, Marta Erismann also a HICAP counselor has
personally assisted over 300 Spanish speakers in the last few months, many of whom
have been unable to communicate with their plans.
Many of Martas Spanish-speaking clients reported that their Part D plans did not
have bilingual representatives, or if they did the number of bilingual staff was limited and
unable to respond to the demand. Many told her that they were put on hold for many
hours waiting for the Spanish-speaking counselor, only to be disconnected after waiting
for an hour or more. Many were told numerous times to call back in one hour on
several continuous days. Numerous callers reported only being able to leave a voice-mail
message with their plans, many leaving messages that went unreturned for two or more
weeks. On the occasions when non-English speakers were able to talk to plan staff, the
staff was not generally knowledgeable about Part D and unable to respond to their
questions.
The problems for non-English speakers carry over into pharmacies, as well. Many
pharmacists, due to lack of bilingual staff, are not able to communicate to Medicare
beneficiaries the reason they are being denied medications. Many of these individuals
leave their pharmacies, not understanding why they can not get their medications.
Rural Issues
In several rural counties of Northern California, the local pharmacy is contracted
with a single PDP, one with a premium too high for duals and people with low income
assistance. Other than a Regional PPO plan, there are no MA-PD plans in these counties.
People in all but one PDP must drive many miles to the nearest chain pharmacy over
mountain roads that become impassable in bad weather. The nearest chain pharmacies do
not provide home delivery services that are provided by the local pharmacy, a serious
problem for people who cannot get to the contracted pharmacy. Mail-order prescriptions
offered by other Part D plans do not always cover all needed medications, or deliver
drugs in a timely fashion.
Marketing Misconduct
Amid the confusion over the new Part D benefit, HICAPs and other Medicare
counselors report inappropriate marketing performed by plan representatives. Some
HICAP managers describe speaking with clients who leave marketing presentations with
no idea what they just had signed up for. Part D plan agents, with little or no oversight,
can take advantage of the general confusion surrounding Part D and steer people towards
plans that will result in enrichment of the agent, but might not be the best plan for the
enrollee.
Example: The HICAP program in Ventura County reports that a Part D plan agent
has apparently switched a group of board and care residents from the plans they
enrolled in with HICAPs help, to the plan that the agent was selling, without regard
to their individual drug or pharmacy access needs.

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Added Cost Burdens for Dual Eligibles
Consumer assistance programs across the country report that many dually eligible
individuals have been charged inappropriate cost-sharing for their drugs, including
deductibles and copayments. Even when the low-income subsidy (LIS) is correctly
applied, however, it must be made clear that most dual eligibles cannot afford the new
cost burdens that are permissible under the LIS.
California is one of many states that does not force Medicaid recipients to pay
prescription drug cost-sharing. While dual eligibles are automatically enrolled in the
low-income subsidy (LIS, or extra help) which covers some of their Part D expenses,
dual eligibles in California (and many other states) now face additional cost burdens that
are out of their reach. HICAPs and other consumer assistance programs in California are
already hearing reports of people unable to pay their rent, grocery and other survival
costs due to these increased cost-sharing amounts.
Unlike current Medicaid rules, pharmacies can deny drugs to those who cannot
afford to pay the new cost-sharing requirements. The only place where dual eligibles will
be exempt from these new obligations is in certain long term care facilities such as
nursing homes, but not assisted living/residential care facilities for the elderly. This,
unfortunately, creates a perverse incentive towards institutionalization (and goes against
the spirit of the Olmstead decision).
HICAPs report that most pharmacies are not using their discretion to waive copays
for LIS individuals. HICAP programs and other non-profit agencies are receiving many
calls from people seeking assistance in paying the copays for which there is currently
none.
Example: A paraplegic client of the Health Consumer Alliance in California only
makes $800 a month. Due to his many complicating medical issues, he is on 35
medications. He cannot afford the $3-5 co-payments for his meds. His delivery
man has paid his co-pays the last two months. He says that he will have to choose
between paying for his rent, food, and medications.
Example: Linda, a client of the Health Consumer Alliance in San Diego, has an
income of $842 a month. She takes about 30 medications and cannot afford the $1,
$3, $5 co-payments. She says that she will be out of money for food by the end of
the month. If she were to move into a nursing home, she would have no
copayments.
Example: Every HICAP counselor in Humboldt County, CA, reports hearing at
least one client report that they will die because of their inability to afford their drug
copays.
Example: One HICAP manager in the Central Valley, responding to a distraught
client who could not afford her copays for her insulin, went down to the clients
pharmacy to pay her copays for the month.
There are additional unintended consequences and costs faced by low-income
individuals due to the problems with Part D implementation. HICAP counselors report
that many of their low-income and/or non-English speaking clients do not have landbased telephone lines; instead, they rely on cell phones, sometimes using prepaid
minutes. Many saw their minutes drained as they waited on hold for hours for a 1-800MEDICARE customer service representative or a Part D plan representative. Some had
their phone service cut off; some had to borrow funds to obtain additional minutes to
continue their efforts to contact Medicare or seek information from their plans.

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Exceptions and Appeals
Once transition fills and various states emergency drug coverage run out, many
more Part D enrollees will be forced to use the exceptions and appeals process in order to
obtain non-formulary drugs. Current Medicare rules give Part D plans broad flexibility in
how they administer their exceptions processes, including the form of request (oral or
written) and the type and amount of evidence prescribing physicians must submit to
prove medical necessity. Although CMS has posted a model form to be used to request a
coverage determination, each plan can create its own process. Some plans are requiring
the submission of clinical notes verifying that all drugs on the formulary are either less
effective or harmful for the beneficiary or both. Because each plans process is different,
physicians must deal with multiple processes to adequately serve all their patients. Many
doctors are unwilling to go through this process because they say the plans require too
much information. Some HICAPs report that some local medical groups are establishing
policies requiring scheduled office visits with physicians in order to assist with patient
exceptions, in order to receive some type of compensation for their time.
Overall, Part D enrollees and those that are assisting them are having difficulty
navigating the exceptions/appeals process. We fear that the volume of exceptions (along
with the need to assist with these requests) will increase exponentially once current
transition first fills run out (if available/accessible) and Californias emergency drug
coverage for dual eligibles expires.
Example: Mr. H., a 23 year old Medicare beneficiary in El Dorado county, was
stabilized on an anti-psychotic drug prior to joining a Part D plan in January.
Although his new plan covered his drug, it did not allow for the amount and
quantity prescribed by his treating psychiatrist. Mr. Hs family began contacting his
plan in early January and his psychiatrist wrote two separate requests to the plan to
cover his drug in the requested dosage amount. When the HICAP program later
intervened towards the end of the month because neither Mr. H. nor his psychiatrist
had received a written response from the plan, a plan representative replied that the
plan had not responded because the physician had not used the correct form. Mr. H.
changed plans in February.
III. STRUCTURAL PROBLEMS -- PART D BENEFIT DESIGN
As referenced above, HICAP counselors and their counterparts nationwide have
been working tirelessly to help educate Medicare beneficiaries about the new Part D
benefit and assisting them in exploring their enrollment options. The nature and structure
of the Part D benefit, however, injects a level of complexity that requires significantly
more time, effort and expertise in counseling each consumer. Trying to both decipher
and navigate the range of Part D plans, drugs covered on their formularies, applicable
cost-sharing based upon which tier a drug is in, assessing any utilization management
tools that might apply to a covered drug, and investigating which pharmacies contract
with a given plan are all challenging, at best.
For further analysis of issues relating to enrollment/disenrollment protections and
choices, as well as access to plan information about utilization management tools and
transition plans, see our website for issue briefs we have co-authored with the Medicare
Rights Center (www.cahealthadvocates.org).
Lack of Standardization
The sheer number of drug plans available that differ in structure, benefits and cost,
make informed choice on the part of beneficiaries difficult to achieve. Tiered
formularies, utilization management tools (such as prior authorization) and contracting
pharmacy networks further complicate decision-making. In addition, the flexibility Part
D plans are given in designing their exceptions process, including determining the form

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of request along with the level and type of medical evidence required, hinders
beneficiaries and their prescribing physicians in obtaining needed drugs.
Part D plans are required to cover all medically necessary drugs within the scope of
drugs that are coverable under the Medicare statute. Many Medicare beneficiaries with
chronic conditions and who take multiple prescriptions, however, are having difficulty
finding plans that cover all of their prescription drug needs. Even if a particular drug is
covered, plans can put higher-cost drugs in higher cost-sharing tiers, limiting the benefit
of having a particular drug covered by a plan. Further, plans do not adequately explain
the restrictions they impose on certain drugs, leaving potential enrollees uncertain
whether or not the drugs would be covered for them. In other words, even if a drug is
covered by a plan, it can be both unaffordable due to its tier placement, or unavailable
due to onerous prior authorization requirements.
The Medicare program should provide a limited number of standard, uniform benefit
packages, and standardize the benefit, cost sharing, and procedures provided through
private plans. CMS should consult with the NAIC, industry representatives, and
consumer groups to standardize the Medicare Part D benefit in the same way Medicare
Supplement insurance (Medigap) products were standardized in 1990. In addition,
exceptions processes should be uniform and standardized among all plans, with a single
form made available to all physicians and pharmacists.
Lack of Safety Net Coverage for Dual Eligibles
When drug coverage for dual eligibles was switched from Medicaid to Medicare on
January 1, 2006, dual eligibles lost much more than drug coverage administered through
their state program, they lost more comprehensive coverage, with less restrictions, less
cost-sharing and more due process protections. As discussed above, data exchange issues
will continue to leave them with gaps in coverage and protection from high costs.
The best way to protect dual eligibles who are unable to access their drugs due to data
system problems reflecting eligibility, enrollment and LIS cost-sharing, is to continue
Medicaid coverage (and federal matching funds) to serve as a true payer of last resort.
Absent a Medicaid extension, we recommend that the Anthem/Wellpoint system be
redesigned and expanded to serve as a payer of last resort as a means of addressing all
eligibility and enrollment problems that dual eligibles face (as has been recommended by
Californias DHS).
Expand Enrollment into Low Income Subsidy (LIS)
Many Medicare beneficiaries who are eligible for the low income subsidy have
failed to apply. While as many as 8 million beneficiaries are estimated to be eligible,
only 1.4 million have actually applied and been found eligible. Of those that applied,
over 60% were denied not because they did not meet the income test, but because their
resources were too high.
Elimination of the asset test for the LIS would greatly expand eligibility to a benefit
that can truly help needy individuals with Part D costs.
Minimal Oversight and Regulation
A great deal of flexibility is given to Part D plans throughout virtually all aspects of
Part D. Even during the early roll-out of Part D, when it was becoming clear that there
were major problems with beneficiaries accessing their drugs due Part D plan failures in
honoring transition policies and providing adequate lines of communication with
beneficiaries and pharmacists, CMS continued to request and recommend that the
plans extend their transition periods and provide more accessibility rather than demand it.
The Medicare program should impose more strict requirements on Part D plans,
including the following:
Stricter formulary requirements (require the plans to cover more drugs)

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Stricter transition policies (requirements, rather than recommendations, for

longer first fill periods)
Standardized forms and procedures for exceptions and appeals
Accessibility standards
o availability of plan-specific information (e.g. required posting of plan
materials, including transition plans and exception and appeals
processes on plan websites and/or CMS website)
o broader language access for non- and limited-English speakers
o greater availability of alternative formats (e.g. for individuals with
limited/no sight)
Enforce existing pharmacy access requirements for Part D plans, especially in
rural areas, or provide alternatives

IV. CONCLUSION
Medicare beneficiaries deserve a prescription drug benefit that they can understand
and easily access. While many individuals are successfully getting their prescriptions
filled and there have been some improvements in data issues and Part D plan
responsiveness, many problems encountered by Part D enrollees will not go away
without further attention and intervention.
Thank you for the opportunity to provide these comments. For more information,
please contact CHA. Respectfully submitted by:
David Lipschutz
Staff Attorney
California Health Advocates
3435 Wilshire Blvd., Suite 2850
L.A., CA 90010
Ph: (213)381-3670
FAX: (213) 381-7154
[email protected]

Bonnie Burns
Training & Policy Specialist
California Health Advocates
Ph: (831)438-6677
FAX: (831)438-2441
[email protected]

MR. DEAL. Thank you. Ms. Rawlings.

MS. RAWLINGS. Thank you. Chairman Deal and other distinguished
members of the committee, thank you for the invitation to address you
today. My name is Susan Rawlings and I am President in charge of
Senior Services for WellPoint, Inc. and that is the parent company of
Blue Cross Blue Shield of Georgia, Indiana, and Maine. The majority of
my career experience has focused in Medicare programs and retiree
health plans that deliver products, programs, and services that meet the
needs of our senior and disabled populations.
I am here today to talk to you about Part D implementation, but I
would like to first start off by saying that for those WellPoint customers
and pharmacists that we have not been able to serve within our own
normal standards, we apologize. We are not discouraged, though. We
are working diligently day and night and are making progress, which I
will share with you today.
Prior to the launch of Part D we provided access to care for over one
million Medicare members and we continue this tradition with the new

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Medicare Part D benefit and we offer the new prescription drug benefit
through our Medicare Advantage prescription drug plans, or MAPDs.
We also have three regional PPOs, or the new program available through
the MA, and they have the Part D prescription drug with them. We also
offer stand-alone prescription drug plans in all 34 regions. WellPoint
now contracts with 98 percent of rural, urban, and suburban pharmacies
across the nation and our network continues to grow. We currently have
an estimated 1.2 million Part D members, and approximately 60 percent
of those are the auto-assigned dual eligibles.
Through the end of February, or February 27th, to be specific, we
have already processed about 7.2 million prescriptions. WellPoint is
fully committed to supporting effective implementation of Part D for all
Medicare beneficiaries together with our partners at CMS. Our highest
priority is to make sure seniors and disabled Americans are getting their
prescription filled on a timely basis and are paying no more than they
should. We are paying special attention to the transition to Part D for
dual eligibles, especially those missed in the auto-enrollment process.
The facilitated enrollment program was created for just that purpose,
to be a safety net for those dual eligible beneficiaries who were somehow
missed in the auto-enrollment. WellPoint is the CMS contractor for this
program. The process that was created allows the pharmacist to submit a
claim for a prescription for a non-enrolled dual eligible person and
enables the beneficiary to leave the pharmacy with their prescription.
Everything the pharmacist needs to know about the process is written on
a standard instruction sheet and has been provided to independent
pharmacies, chains, and the pharmacy associations. If a pharmacy
follows the steps described on the sheet, the dual eligible will be enrolled
in a WellPoint plan and can immediately access their new drug benefits.
The pharmacy is a key partner in the program overall and especially
in making this particular element work effectively and efficiently. They
are responsible for verifying the eligibility of this individual when they
are at the pharmacy and what that means is looking at their card, the
Medicare card with their number on it, and they also are required to enter
appropriate and minimal information into the system like the name,
address, and birth date and a valid Medicare number in order for the
process to work effectively. These modest requirements promote faster
prescription processing and acts as important safeguards that protect
pharmacists, plans, and CMS from potential abuse of the system.
This process is, in fact, little different than the process used to bill
any public or private plan in the pharmacy and I can tell you it is
working. As of February 27th, we have processed approximately 1.2
million claims through this system in every State in the country and that
has enabled about 120,000 people to get their prescriptions and refills

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now, in the second month. This unique program on the facilitated

enrollment system between CMS and WellPoint, having served almost
120,000 people for two straight months, is by almost any measure a
success. We are quite proud of it.
I would like to highlight a number of proactive steps we have taken,
however, to help all Medicare beneficiaries around the country. Like my
colleagues on the panel, we faced a number of challenges as we have
moved through this in handling the service for our pharmacists and our
members. We increased our staffing in our call centers, both in our
pharmacies and our beneficiary call centers; we have added significant
technological capability to expand capacity and to streamline our
processes. We voluntarily extended our formulary transition rules from
30 to 90 days beginning January 1st before CMS asked us to and we have
extended the facilitated enrollment prescription quantities from an
allowed 14 days in early January to 30 days in mid-January, so we have
been filling a full month there.
We have enhanced our communication efforts using multiple
strategies with pharmacies and pharmacy associations, and these steps
are working. We have a lot of steps left to take, but we are seeing
significant improvements. For example, in our beneficiary call centers,
our average speed to answer how long it takes us to answer the phone has
improved; over 80 percent as compared to the first couple of weeks of
January.
I would like to take this opportunity to recommend some additional
strategies that CMS might consider to further improve the Part D
implementation process and we very much appreciate their efforts to
work with us collaboratively on these recommendations. First, to
continue aggressive efforts to provide correct, accurate eligibility
information. We have seen significant improvement from the beginning
of January, but there is still more to do. Resolving this single issue will
accelerate the pace at which the overall program is functioning smoothly.
And second, clarify that beneficiaries who choose to switch plans
and enroll after the 15th of the month may not have their enrollment
materials before the first day of the following month just due to data
processing. This would help alleviate confusion among beneficiaries,
including those for whom the data files may not yet correctly indicate
their eligibility for the low-income subsidy.
In conclusion, I would like to say the Part D program is already
making a big difference in the quality of life for many Medicare
beneficiaries. We share the concern for beneficiaries expressed by many
stakeholders, including this subcommittee, but I also want to
acknowledge that this unprecedented public/private partnership between
our industry, pharmacies, beneficiaries, and CMS brings together the

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talent and determination necessary to solve these problems. Thank you

and I would be happy to answer your questions.
[The prepared statement of Susan Rawlings follows:]
PREPARED STATEMENT OF SUSAN RAWLINGS, PRESIDENT, SENIOR SERVICES, WELLPOINT,
INC.
Introduction
Chairman Deal, Representative Brown, and distinguished members of the
Subcommittee, thank you for the opportunity to discuss implementation of the Medicare
Part D Prescription Drug Benefit and the unique role that WellPoints Facilitated
Enrollment process is playing to address the challenges related to the transition of fullbenefit dual eligibles to the Part D program. Facilitated Enrollment is functioning as an
additional layer of protection to help fulfill the nations promise to Medicare beneficiaries
with special needs.
I am Susan Rawlings, Senior Vice President and President in charge of Senior
Services for WellPoint, Inc. WellPoint, Inc. is the largest publicly traded commercial
health benefits company in terms of membership in the United States. WellPoint is an
independent licensee of the Blue Cross Blue Shield Association and serves its members
through Blue Cross and Blue Shield plans in fourteen states and UniCare.
My career has been focused on Medicare programs, retiree health and applying the
principles of geriatric medicine. At WellPoint, I am building on my experience by
developing products, programs and services that meet the needs of our senior and
disabled populations; for example, a key focus of mine over the last year has been the
planning and application processes associated with the participation of WellPoint
companies in the new Medicare Part D program. I am also continuing my efforts to
broaden the understanding about older adults among multiple stakeholders. I believe that
greater insight will be required to ensure that the health care system and the Medicare
program are well prepared as the baby boomers age.
WellPoint Participation in Part D Prescription Drug Benefit Program
WellPoint has a long history of providing services to Medicare beneficiaries,
including offering Medicare supplemental insurance and Medicare Advantage programs.
As of 12/31/05, we were serving over 1 million beneficiaries in these programs across the
country. Prior to the launch of Part D, we offered the interim prescription drug card. We
have continued that tradition with the new Medicare Part D program. We offer the
prescription drug benefit through our Medicare Advantage-Prescription Drug Plans (MAPDs) in several regions, including the newly available Regional Preferred Provider
Organization (PPO) in three regions, as well as stand-alone Prescriptions Drug Plans
(PDPs) in all 34 regions, encompassing the 50 states and the District of Columbia.
WellPoint offers three benefit plan options, enabling Medicare beneficiaries to choose the
benefit plan that best meets their individual medical and financial needs. The formularies
that support these products are consistent across the country. Our formulary designs meet
or exceed the minimum requirements established in the law. Our pharmacy network is
made up of 56,437 pharmacies nationwide, representing 98% of available retail
pharmacies.
WellPoint is pleased to report that we have an estimated 1.2 million Part D
members, of which approximately 60% are auto-assigned dual eligibles. To date, we
have processed an estimated 6.5 million prescriptions of which approximately 1.2 million
were processed through the Facilitated Enrollment program.

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WellPoint Commitment to Part D Success
WellPoint is committed to supporting the effective implementation of Part D for all
Medicare beneficiaries. We are focused first on making sure that these people get the
prescriptions they need filled timely, and then resolving issues and problems so that all of
our Part D members have a good experience when they go to the pharmacy. The
transition to Part D for dual eligibles, and particularly those that were missed in the auto
enrollment process, was not flawless and should have been easier for them. WellPoint
shares the concern for the beneficiaries, and the frustration of pharmacists, elected
officials, advocates, the States and CMS, but we are not discouraged. WellPoints
primary goal is to ensure that beneficiaries receive all the benefits of their health
coverage, including access to prescription drugs, in a timely and beneficiary-friendly
manner. We are doing everything in our power to make the transition a success and
believe that progress is being made.
As all of the stakeholders work to improve the transition and implementation of this
program, we must all keep in mind the tremendous value of adding a comprehensive
prescription drug benefit to the Medicare program. Millions of seniors will not only see
cost savings, but true improvements in their quality of life. The mindset at WellPoint is
to focus obsessively on enabling seniors and disabled beneficiaries to receive their
prescriptions, even when they were not initially assigned a plan. The recent report that
nearly 25 million now have prescription drug coverage is not just great news, but reminds
us that we must keep our full attention on resolving barriers to service. As Part D
members begin using their new prescription drug coverage, the confusion in the
marketplace will abate and a solid foundation for the Part D program will begin to take
hold.
Recognizing Dual Eligibles As a Vulnerable Population
Continuing to improve the enrollment process is especially critical for the 6.3
million dual eligibles who often have more health care needs than other Medicare
beneficiaries. Many dual eligibles live with chronic conditions that require multiple
medications. They may have physical or cognitive disabilities, including mental health
illness and Alzheimers disease. They may suffer from diabetes or HIV/AIDS, and they
may live in a nursing home. We provide services to dual eligibles facing cultural,
linguistic and literacy barriers.
A Customer First Approach to Problem-Solving
Customer first is a core value at WellPoint. Our number one priority for this new
drug program is that each beneficiary leaves the pharmacy with their prescriptions filled
at the appropriate cost to them. For this reason, WellPoint is committed to shielding
beneficiaries from complex work-around solutions and shielding pharmacists from
unavoidable back-end reconciliations.
The level of collaboration among CMS, plans, pharmacies and other stakeholders is
unprecedented. Continuing to improve on the progress weve made requires maintaining
this collective effort. A shared approach to problem solving is the essential ingredient for
making this new program work for all beneficiaries. Stakeholders are stepping up to the
plate and accepting mutual accountability for meeting the challenges and ensuring the
success of the Part D program. When all parties are bound by a common interest in
putting the beneficiary first, an environment is created that allows for constructive
criticism and open dialogue. The results being timelier implementation of the steps
needed to achieve a smooth transition, faster identification of new issues, and smarter
problem resolution.

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Facilitated Enrollment Program: A Pharmacy Point of Service (POS) Solution
In early November, 2005, CMS approached WellPoint to develop a pharmacy-based
solution to ensure that any dual eligible who was not auto enrolled would still get a
needed prescription filled. WellPoint was ideally positioned for this role because we
were the only company offering a plan with a premium below the low-income benchmark
in all fifty states. On November 21, 2005, WellPoint signed the contract to become the
Facilitated Enrollment, or Point-of-Service (POS) vendor, for CMS. We agreed with
CMS that no dual eligible, who are among Medicares most vulnerable beneficiaries,
should experience any gaps in coverage.
Once the contract was signed, WellPoint began a massive effort to operationalize the
Facilitated Enrollment process in time for a January 1st effective date. A successfully
designed safety net program would require executing many tasks related to claims
administration, staff training, outreach and education, and other core areas of operation in
both our health plans and our PBM. WellPoint was particularly focused on
communication strategies, recognizing that working jointly with CMS to educate
pharmacists would be critical to their use of this new process.
The Facilitated Enrollment process makes enrollment possible in those situations
where a full benefit dual eligible visits the pharmacy and the pharmacist discovers that
the individual has not been auto-enrolled into a Part D plan. With special facilitated
enrollment, a dual eligible is enrolled into a WellPoint plan and can immediately access
their Part D prescription drug benefits. A beneficiary can, however, also opt out and
select a different Part D plan at any time. Pharmacy associations, chains and individual
pharmacies have been provided information describing our Facilitated Enrollment
solution.
The Facilitated Enrollment process is straightforward and consistent with putting the
dual eligibles first: establishing a minimum threshold for proving Medicaid and Medicare
eligibility in order to reduce the burden on the beneficiary. Let me describe the steps that
a pharmacist can follow on behalf of a dual eligible that visits the pharmacy before he or
she has been auto-enrolled but who has a Medicaid card:
1. The pharmacist bills Medicaid and the claim is denied.
2. Pharmacist checks for Medicare eligibility by one of the following:
o Submitting an E1 query into the TROOP facilitator;
o Calling 1-800-MEDICARE;
o Requesting to see a Medicare card;
o Requesting to see the Medicare Summary Notice (MSN); or
o Requesting to see a letter from SSA stating that s/he may be eligible for
Medicare.
3. If the pharmacist is unable to verify enrollment in a Part D plan through these
mechanisms, she/he provides the prescription drug to the beneficiary at the $1/$3
co-payment levels and bills a special WellPoint account which WellPoint has
provided on its payer sheet to pharmacists.
At WellPoint, the claim is flagged as being outside its normal claims process in order
to prevent it from being rejected and then the claim is paid. If the pharmacy is not
contracted with WellPoint, the pharmacy is sent special instructions to establish the
mechanism for payment. WellPoint also flags this individual for CMSs vendor, Z-Tech,
to verify their full dual eligibility status. At this point in the process the dual eligible is
enrolled in a WellPoint plan, (but can always opt out and choose a different plan later). If
Z-Tech confirms the dual eligible was previously enrolled in another Part D plan,
WellPoint still pays the pharmacy and works directly with that plan for repayment. This
approach is consistent with our principle of shielding pharmacies from back-end
reconciliations.

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The pharmacy is responsible for verifying the individuals eligibility for Medicare
and Medicaid at the point of sale. As mentioned above, this is done through reviewing the
Medicare and Medicaid cards or paperwork. This is a critical step in the process. The
pharmacy is a key partner in caring for these duals, and drugs should be dispensed only to
those eligible for the program. Although the pharmacy is responsible for verifying
Medicaid and Medicare eligibility, the Facilitated Enrollment program only requires the
pharmacist to enter appropriate, minimal information such as name, address, birth date
and a valid Medicare number into the processing system. This requirement, in effect,
streamlines the electronic edits at retail and mail to facilitate more rapid prescription
processing. At the same time, the minimal data provided acts as important safeguards
that minimize risk exposure to pharmacists and potential abuse of the program.
Additional Proactive Steps To Support Implementation Goals
Based on our experience with launching new programs and serving seniors and
disabled beneficiaries, we planned for a higher call volume and a longer average call
length that we thought would be appropriate for this program. However, like other Part
D plans, our estimates of the difference in magnitude fell short; for example, we
experienced calls lasting more than twice as long and call volume nearly 50% higher than
we predicted. Beneficiaries and pharmacists were negatively impacted, experiencing
lengthy hold times and busy signals. Some abandoned their calls in frustration. Overall
electronic eligibility challenges across the program, particularly in early January, also
created additional volume as pharmacies wanted to discuss eligibility over the phone.
WellPoint staff has worked collaboratively with CMS, pharmacies, industry trade
groups, etc. to resolve the issues facing the program. We have been working literally day
and night to fix these problems, as our first priority is that Medicare beneficiaries get the
prescriptions they need on a timely basis. Many of the issues facing the program are
systemic and data related and are being aggressively worked by industry and CMS
workgroups. We must continue this collaborative work across the industry and with
CMS it is improving daily, but there is much more to do.
To improve our own service levels, some of the most effective mid-course
corrections we have taken include:

Increasing staffing as quickly as possible. We have already increased Part D

staff from 455 people at January 1 to 545 at January 31. At the end of February
we have nearly doubled our staff, with 900 trained people serving Medicare
beneficiaries and pharmacies.

Extending the hours of operation daily and to seven days a week.

Adding additional T-1 lines in the PBM to speed up phone service and reduce
busy signals.

Providing connectivity and availability to interface with CMS on a 24/7 basis.

Implemented internal procedures to address urgent situations as they arise.

Recognizing that our rapid response must also include strategies that assist Medicare
beneficiaries and our pharmacist partners, we have also implemented the following:
On Behalf of Beneficiaries

Voluntarily extended our formulary transition rules from 30 days to 90 days

beginning January 1st prior to CMS mandating such a change for all health
plans.

Extended the Facilitated Enrollment prescription quantities from an allowed 14

days to 30 days.

Increased beneficiary education to inform them about any changes they may
experience during the transitional drug period.

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Contracted with outside vendors to accelerate information gathering from Part

D program applicants to complete applications. When possible, information is
obtained from external data sources to expedite automatic completion in order
to minimize contacting beneficiaries directly.

On Behalf of Pharmacists

Adopted an inclusive network development strategy to contract with a range of

pharmacies, including independent and rural pharmacies, to increase pharmacy
access to network advantages and to enhance beneficiary access to affordable
prescription drugs.

Enhanced outreach by constantly communicating with pharmacies through fax

blasts, weekly conference calls with independent pharmacy associations (e.g.
National Association for Independent Pharmacies and other independent chain
groups) and chain drug stores (e.g. National Association of Chain Drug Stores
and smaller work groups formed from major chains), and individualized calls to
reach as many pharmacists as possible about Facilitated Enrollment.

Engaged in active training through our PBM on the Facilitated Enrollment

process for pharmacists when they call in.

Provided direct technical assistance to pharmacies and their vendors if

necessary to address software issues.
In brief, WellPoint has developed multiple mechanisms to eliminate the obstacles
that interfere with dual eligibles receiving their medications and to ensure that
pharmacists can serve their Medicare customers according to their own high service
standards, while receiving timely and accurate reimbursement.
Customer Service Improvements: Progress To Date
Improvements Benefiting All Members and Pharmacies. Our customer phone
service has not yet reached normal levels, but it is improving. For example, in our
beneficiary call centers, our average speed to answer and our abandonment rates have
improved by over 80% as compared to early January.
Facilitated Enrollment Results. As noted previously, WellPoints Facilitated
Enrollment program has processed approximately 1.2 million claims, enabling an
estimated 240,000 beneficiaries to receive their prescriptions. As we monitor Facilitated
Enrollment, we are finding that the process truly operated as a safety net in response to
data and transaction issues. The good faith behind this program has also created an
incentive for non-network pharmacists to join our network and enjoy faster payment
through electronic reimbursement. Overall, early skepticism regarding receiving
payment seems to be yielding to an increased comfort level among pharmacists as
evidenced by the increased claims volume.
Remaining Challenges and Recommendations
A number of challenges remain that require all stakeholders to work in partnership
to establish a high performance Medicare Part D program that will make a difference in
the lives of so many older and disabled Americans. With enrollment growing daily, we
must not only invest our time and energy, but also capitalize on the new relationships and
knowledge gained from this experience. Addressing issues related to dual eligibles and
the Facilitated Enrollment process is a top priority for WellPoint. These more vulnerable
Medicare beneficiaries are also at the forefront of CMSs efforts as well. For this reason,
I would like to take this opportunity to recommend some additional administrative
strategies that CMS, as our partner, might take to further optimize the Part D
implementation process, benefiting all constituencies beneficiaries, pharmacists, CMS
and health plans. Our recommendations include:

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1.

Intensify efforts to provide correct, accurate eligibility information. Many of

the current challenges associated with Part D implementation stem from the
need for clean, accurate eligibility data. Resolving this single issue will
accelerate the pace at which the overall program is functioning smoothly.
Improving data accuracy and the process for updating and validating the CMS
eligibility file will ensure claims are paid by the correct plan and the beneficiary
is charged the correct cost sharing amount, as well as eliminate the incentive for
pharmacists to substitute the phone or the Facilitated Enrollment process for the
more appropriate E1 transaction. CMS and the industry have made substantial
progress since early January.

2.

In order to avoid confusion and frustration for beneficiaries, CMS should

clarify that beneficiaries who choose to switch plans and enroll after the 15th
of the month may not have their enrollment materials before the first day of
the following month. Allowing those beneficiaries that enroll in or switch their
Part D plan prior to the 15th of the month to be enrolled with their new plan on
the first day of the following month would help address this issue. CMS
should likewise educate beneficiaries accordingly about the importance of
enrolling prior to the 15th of the month. It is important to note that most states
already use a similar approach with respect to dual eligibles applying for
Medicaid eligibility. This recommendation would go a long way towards
avoiding disruption for those Medicare beneficiaries for whom the data files
may not yet correctly indicate their eligibility for the low-income subsidy.

3.

Increase Pharmacy Outreach to Create One-Stop Shopping For Help. CMS

has been conducting educational outreach to pharmacies and we commend the
efforts and we recommend it continue in earnest. Additionally, we
recommend that CMS train their call centers to handle additional pharmacy
related calls, particularly when pharmacies call about the Facilitated Enrollment
process. Currently, CMS refers pharmacists to our call centers when contacted
about the Facilitated Enrollment process or edit questions. Since the process is
not complicated, we would suggest that CMS directly provide instruction to
pharmacies on how to process a Facilitated Enrollment claim during the initial
call or, as we add the editing of the Health Insurance Claim Number (HICN),
share the reason for the Facilitated Enrollment edit. Pharmacists would
appreciate the timely assistance and many would use the information to trigger
the FE enrollment process without having to make a second call to WellPoint.
We would be pleased to work with CMS to train their staff.

Conclusion
The January 1st effective date for the launch of the Medicare Part D program brought
with it a surge of business operations activity and customer service requests. In
preparation, WellPoint did extensive advanced implementation planning and outreach,
knowing that the program was complex, with many moving parts that had to work in
synchrony. Our hope was that we had anticipated the major barriers that might arise as
seniors navigated the enrollment system and pharmacists attempted to fill prescriptions.
While it was not possible to foresee all the challenges that this enormous undertaking
would pose, it is in WellPoints DNA to be a part of the solution. We will continue to
strive to get past the hurdles because the Medicare Part D prescription drug program is
worth it.
Thank you for your time. I would be happy to answer any questions you may have.

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MR. DEAL. Thank you very much. We have a reduced audience up

here now. Ms. Walsh, let me start with you. First of all, with regard to
the dual eligibles who were automatically enrolled. Did the State do
that? Was that a State decision that automatically enrolled them in the
plans or how was that handled?
MS. WALSH. We have drugs for the elderly program that we were
going to intelligently assign these people into plans so that they would
have 90 percent or more of their drugs covered and we certainly didnt
want to leave our dual eligibles, who are more frail and more poor than
our ESPAP members, without that kind of intelligent assignment. So we
sent a proposal to CMS in October that wasnt acted upon until late
December with approval from CMS. We were told by CMS you can
enroll in a plan on the 30th and have coverage on the 1st, so when we sent
our files to the plans on the 20th, we did expect them and had assurances
from the plans that they would honor our enrollment for January 1st and
many of them did honor the enrollment. What happened primarily was
they didnt have that low-income subsidy indicator.
MR. DEAL. Right. So your primary problem has been getting that
low-income subsidy built into the formula?
MS. WALSH. Yes, it really has, yes. Yes.
MR. DEAL. All right. Is progress being made on that?
MS. WALSH. Oh, every day. Things are getting better along those
lines, but I think, for some reason, we have one particular plan in Maine
that has the bulk of our people and they still are missing thousands and
thousands of low-income subsidy indicators.
MR. DEAL. And where does that information have to come from,
CMS?
MS. WALSH. Yes.
MR. DEAL. Okay. With regard to the money that the State has
expended, my understanding is that a part of that money is the
differential between what the traditional Medicaid program would have
paid and what the plans themselves may have paid. You have paid based
on what the Medicaid would have paid the pharmacists for the drugs and
you are part of the model, so that differential will be made up to you. Is
that your understanding, as well?
MS. WALSH. Yes, and I am glad you brought that up because I was
hearing Dr. McClellans comments earlier about that and I wanted to say
the State of Maine and many other Medicaid programs typically
reimburse pharmacies better than private insurance companies. What we
do is we negotiate aggressively with pharmaceutical manufacturers so
the net price or the net cost to the State, under the Medicaid program, is
lower than what you are getting under Medicare Part D.
MR. DEAL. Is that because of the rebates you are talking about?

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MS. WALSH. Because of rebates, that is correct.

MR. DEAL. Okay. Mr. Lipshutz, with regard to the problems that
you have outlined, are you seeing progress being made in terms of
eliminating some of these problems that initially presented themselves on
time problems?
MR. LIPSHULTZ. The call volumes to the State SCHIP program, the
HICAPs, has diminished somewhat, but it is my understanding that is in
large part because the calls were primarily coming from dual eligibles
prior to the State stepping in with that emergency coverage.
MR. DEAL. Right. I think once we get the dual eligible situation
ironed out as nearly as possible, much of the complaints will actually go
away. Mr. Paul, would that be your assessment, as well?
MR. PAUL. That is correct. We have noticed a significant reduction
in the call volume since the beginning of January.
MR. DEAL. And Ms. Rawlings, I assume you indicated that your
time is reduced by 80 percent, I think, is what you said the time for
waiting?
MS. RAWLINGS. That is correct, it is. Yes.
MR. DEAL. Okay. So you know, and Mr. Ettienne, we want to
extend to you the same expression I did to the representative, Mr. Song,
from the Community Pharmacists, and that is the role that your chain
pharmacy people have played in making this transition possible, too.
You really truly have been heroes at every level because you are on the
front lines. We, by necessity, had to put you there and I want to thank
you for that. Do you feel like we have made significant progress and do
you feel like that we have gotten over most of the rough spots so far?
MR. ETTIENNE. I think we have made significant progress in the
process. I think, like with any large implementation, you expect hurdles
at the front of it. Moving forward in the stores, the pharmacists are
indeed much happier today when compared to January 1st.
MR. DEAL. Right. Well, I think the suggestion that Ms. Rawlings
made about that if you are going to change plans, you need not expect
that you can come in the last day of the month and then the first day of
the next month that somebody is going to have your information there
and there is not going to be a problem. I do think that that is the
information that we need to get out with regard to swapping plans, is to
be prepared for a little bit of lag time. We do live in the information age,
but we dont live in that kind of information age, especially when you are
talking about millions of people.
Well, that will be all that I will ask you. I do appreciate all of your
patience, again, your presence here today and I think this will be an
ongoing discussion that we will have and hopefully the complaints that
we have heard will not be the same complaints that we hear the next

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time. Hopefully, we will address those and in anticipation of those, we

hope that you will continue to share the things that you see that need to
be corrected with CMS or with us and as much as possible, we will try to
address those. Mr. Pallone, you are next.
MR. PALLONE. Thank you. Those of you who were here when Dr.
McClellan spoke know about my concern with this whole appeals
process and prior authorization and what is going to happen after the
transition period is over with. So I wanted to start by asking Mr.
Lipshutz about the transition policies and also the appeals process. We
have heard a lot of instances where Medicare drug plans failed to honor
their transition policies and where they were, of course, supposed to give
beneficiaries a one time fill for prescriptions not on a drug plans
formulary without other barriers like step therapy or prior authorization.
According to calls received by the American Psychiatric Association,
during the first nine weeks of Part D, in 44 percent of the cases that came
to their attention, continuity of care was disrupted for vital medications
covered by CMSs all, or substantially all, guidance because patients
were unable to obtain needed medications, particularly serious for people
that have mental health problems. And it seems to be, in spite of what
the Bush Administration is telling us, something is not working. Dr.
McClellan told us everything is fine but here is an example of where the
Administration has failed dismally, in my opinion.
So I just wanted you, Mr. Lipshutz, if you could comment on what is
happening to individuals with mental illnesses and maybe provide
examples of whether or not things are really fine, as the Administration
would have us believe.
MR. LIPSHULTZ. I think the example that I highlighted of Mr. H., the
23 year old Medicare beneficiary who was stabilized on anti-psychotic
medication is quite illustrative in that he is an individual who was
stabilized on a dosage amount of a particular medication that was
amongst the required six categories of drugs that all plans must cover.
He found, or his family found, that while the drug was covered as
required under Medicare rules, that he was unable to access the dosage
amount that his psychiatrist had worked very hard to put together that
worked for him. I think that experience is echoed over and over.
In response to your questions about the transition plans and the
exceptions and appeals processes, at the outset, CMS put fairly lax
requirements on plans about the need to provide transition policies. In
fact, initially, plans were not required to even provide a first fill for
prescription drugs. They could either provide a first fill or contact
enrollees to sort out whether or not they needed any prescription drugs
that were not on the formulary to try to work with them to change their
prescription drugs.

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Since then, CMS has moved in the right direction by requiring more
out of plans as far as transition first fills, but obtaining what these actual
policies are from plans and how they are applied has been very difficult,
from an advocate standpoint, to try to get that information from the
plans, and we are hearing that lots of individuals are having trouble
actually accessing that transition policy that CMS has requested plans to
follow. In large part, that happens at the pharmacy in problems with
information exchanges between pharmacies and Part D plans. A lot of
pharmacists are unaware of the obligations they have to fulfill or are
unwilling to honor transition plans.
MR. PALLONE. And then that once a transition process, you know,
or that period is over, then we are going to have more problems, I think,
with appeals and prior authorization. There have been a number of
reports where drugs that are on the formulary have high quota sharing
and as a result, they are unaffordable and beneficiaries are faced with
these exceptions and appeal processes and cumbersome prior
authorization. Can you talk a little bit about how these things are
impeding beneficiary access to needed medicines or making excess work
for pharmacists or doctors? You know, I mentioned before with Dr.
McClellan about having some kind of standardization. Do you think it
would be wise to adjust cost sharing requirements that standardize and
simplify exceptions or appeals? I mean, is there more that can be done in
that regard?
MR. LIPSHULTZ. I think that simplifying the exceptions and appeals
process along with the utilization management tools would go an awfully
long way towards helping beneficiaries get their prescription drugs. A
number of doctors have informed HICAP programs and beneficiaries
that they are simply not going to follow the exceptions and appeals
process because they have to deal with different plans and different
policies for each Part D plan. Part D plans have a good deal of discretion
in how they establish their exceptions and appeals processes. They can
determine whether or not they accept requests over the phone or in
writing, and they can set the amount and type of evidence that physicians
must provide to the plans in order to determine medical necessity.
One medical group in northern California has established a policy
whereby it will require all of its physicians not to assist their patients
with the exceptions and appeals process unless the patients have
scheduled office visits with the doctors because otherwise the doctors are
uncompensated for that time. But if a beneficiary needs a drug in a quick
amount of time, that is going to be very difficult for a beneficiary to do,
to try to schedule a doctors visit and go in and get that drug.
Standardization of the exceptions and appeals process, including
standard forms that were used by all the plans would help both

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beneficiaries and their prescribing physicians access need prescription

drugs.
MR. PALLONE. All right, thank you. Thank you, Mr. Chairman.
MR. DEAL. Thank you. Mr. Buyer.
MR. BUYER. Mr. Ettienne, for the purpose of open disclosure, did I
pronounce it correctly? No? How do you pronounce your name?
MR. ETTIENNE. It is okay.
MR. BUYER. No, no, no.
MR. ETTIENNE. Ettienne.
MR. BUYER. For purpose of open disclosure, my daughter, Colleen,
is a pharmacy student out of Purdue and has worked for CVS for three
years.
MR. ETTIENNE. Okay.
MR. BUYER. So I got to live through this, through my daughter,
because she was working on January 1st and January 2nd and who do you
think she came home and gave hell to?
MR. ETTIENNE. Daddy.
MR. BUYER. Daddy, yes. And so it was pretty unfortunate, some of
the glitches that, in fact, that occurred, especially on the dual eligibles. I
dont think there should be any excuse right now with regard to our long
term care dual eligibles. There shouldnt be any excuse, yet I have
spoken with three different pharmacists in Indiana, three different sizes,
small, medium and large. Lafayette, Indianapolis, Bedford. I didnt go
to CVS or Walgreens or any of those, these are independent pharmacists.
The one in Bedford, in particular, said that about 10 percent of his claims
are still this problem with the dual eligibles and the long term care and
the deductibles and that is pretty sad. Is CVS, or are you still seeing that
problem?
MR. ETTIENNE. We have seen a significant reduction in the number
of problems that we have had from January 1st to today. I cant say that
there arent problems, but the number of problems that we are seeing
now is dramatically less. I think the advantage that we have had is the
preparation. We have a tremendous team in the corporate office and they
are working through a lot of the issues and getting that information to the
pharmacists in an effort to help them process the claims.
MR. BUYER. One thing I have learned here in Congress, every time
we try to make an effort on a legislative front, there are always
unintended consequences, so by example, when we changed the liability
with regard to the manufacturing production of small aircraft to bring the
industry back to the United States, so we changed the products liability
rules, okay? So it is kind of a good thing. Wow. So we had this
incredible impact upon what? The exodus of technical skills out of the
military into the private sector, the loss of pilots out of the military, right,

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because what did we do? We have now spawned a new industry because
we brought back the small plane business in America. I am talking about
small plane meaning jets, you know, and wonderful aircraft, but we
brought that because we made a change in the law.
Likewise, we now create a program whereby pharmacies are also
experiencing an increase workload. You have an increase in workload
because we have created a program whereby individuals can now access
their medications, but what pain have we also now increased in the
health system with regard to we were already short pharmacists and
technicians? So is there some--I mean, give me a way ahead, a look
ahead. I want you to help us here. Are we saying Steve, that we need to
now be in communication with our pharmacy schools around the
country, that we need to increase the positions because relative to
demand, this is not going to work? If that increased by one-third, you
have only got a certain supply of those pharmacists. Tell me what we
have done to your life.
MR. ETTIENNE. We certainly have increased workload in the
pharmacies. A greater supply of pharmacists is definitely a good thing
for the industry. We know, I mean, we have seen in many States across
the country where pharmacists are indeed in demand, but they are in
short supply. If I were to attempt to look into the future, I would say
hey, you know, this is indeed a good thing for the patient because we are
getting people drugs that they didnt get prior. We do need to make
adjustments to the program as designed to ensure that we dont have
what you are describing; we dont have any kind of catastrophic events
down the road.
I would say if you had some means of increasing the supply of
pharmacists to deal with the work flow, by all means. We would be
happy to step up and work with you in realizing that process.
MR. BUYER. I just encourage you today--you are going to be
telegraphing this, hopefully, before we can see it and we, in turn, can be
extremely helpful to the colleges and what their requirements are to open
up these slots. I just want to do the look ahead. I want to be prospective,
not reactive. So please, when you speak to your comrades, let me know,
all right?
MR. ETTIENNE. We certainly will. We do need pharmacists, so by
all means, you cannot wait for that process, just go right ahead. We will
be happy to employ them.
MR. BUYER. All right, thank you.
MR. DEAL. Mr. Allen, you are recognized.
MR. ALLEN. Thank you, Mr. Chairman. I want to thank you for
being here. I assure you all that though it may be late and the committee
has thinned out a little bit, that your testimony is either being watched

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now by other staff members or your testimony has been or will be read
and we thank you very much for coming here because you do bring an
experience that we dont get ourselves, obviously. I had a couple of
questions. Ms. Walsh, I wanted to go back to Maine just for a minute.
There are all these different plan choices and for some people this is a
curse, not a blessing. It is too many. CMS auto-enrolled the dual
eligibles, 6.4 million across the country, without regard to their diagnosis
or their current drug regimen. Now, you took a different approach in
Maine and I think you described that. You dont need to go back into
that, but looking forward, I think it was Mr. Lipshutz who said California
will have 10,000 dual eligibles a month coming into its system because
people who are today on Medicaid, you know, obviously some of them
become 65, they qualify for Medicare so they are covered and they have
the same sorts of issues. Going forward, Ms. Walsh, what advice would
you give CMS on how to deal with the ongoing dual eligible issue?
MS. WALSH. Well, I think enrollment into plans and eligibility are
the two largest issues going forward and I think something CMS could
do in the future is work more collaboratively with States up front. States
typically, of their dual eligible, maintain current drug profiles for
members. In Maine, we have built an algorithm and are able to
recommend which plans people should be going into and I think one of
the keys to working dual eligibles effectively through this Medicare Part
D benefit is to really assign them to plans that have the best match for
their drug benefit, especially because it takes six to eight weeks to get out
of a plan and into another one.
MR. ALLEN. To get out of a plan--well, some people cant get out of
a plan-MS. WALSH. Some people are stuck there for a long time.
MR. ALLEN. About once a year, right?
MS. WALSH. Well, I think if you are a dual eligible, you have the
option under Medicare to change your plan every month. It just really
takes almost two months to get into a new plan, so if you have been
randomly assigned by CMS into a plan and most of your drugs arent
covered, you have to wait almost two months to get into a plan where
your drugs are covered.
MR. ALLEN. Okay. I would like to talk just a little bit, hear from, I
guess Mr. Lipshultz. Maybe I will ask this of you. The virtues of
simplicity. I mean, based on your experience, would a simpler plan be
more usable, easier for seniors and the disabled to navigate than the
current system? And if so, how would you suggest we go about it?
MR. LIPSHULTZ. Well, to use my mom as an example, and I would
be the last to say anything disparaging about my mom, but she would not
be able to figure this program out if it wasnt for my help, who has

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studied the program quite a bit. I think the fact that there are a number of
plans and in Los Angeles County you have 47 stand-alone prescription
drug plans plus at least 20 Medicare Advantage prescription drug plans
for almost 70 plans, the number of plans, the fact that you need to take a
look at what is on the formulary. Then once you see what is on the
formulary, you have to find out how much you pay for your drug,
whether or not that drug is subject to utilization management, whether or
not your drug plan has a network of contracting pharmacies and the fact
that there is such variance amongst the plans I think would lend itself to
more standardization and I would encourage the committee to take a look
at the debate around standardizing the Medicare supplemental insurance
programs back in the early 1990s which made them a lot more
understandable and easy to use. Definitely more standardization would
help beneficiaries help navigate this benefit better.
MR. ALLEN. Okay. Mr. Chairman, I have just one concluding
thought here. I want to come back to this question of savings. Mr. Paul
mentioned savings, and Dr. McClellan mentioned savings. I get very
worried about our talking about savings in the aggregate which covers up
a lot of things. I mean, for example, I think Mr. Paul, you said there
were real savings enjoyed by millions. You may be right. All I know is
that the big question is compared to what? We would agree that for
people who had no prescription drug coverage in the past and now they
have a plan, probably that plan works unless they dont have very much
in the way of drug expenses and they are paying more in premiums than
getting back in cost. But compared to Medicaid, it is not so clear.
Compared to those people who are on the pharmaceutical companies
own free or reduced cost plans, it is not so clear. Compared to some of
the State programs like Maine had, it is not so clear. So I just, this is a
pitch for a little bit of complexity here and how we think about because
clearly all of us on this side of the aisle want those of our constituents
who can benefit from this plan to get the benefit of the plan. On the
other hand, we are still hearing from lots of people who are not very
happy and the complexity is a part of the issue. And with that, I wont
ask you all to comment on that. Probably enough has been said today,
Mr. Chairman. Thanks for your patience.
MR. DEAL. Well, thank you, and I thank you for staying with us the
whole time. Thanks again to all of you. Your comments have been
made a part of the record, and your written testimony has been added.
Obviously, there are differences of opinion, concerns, but all of us,
hopefully, are working toward a mutual goal of making this work for the
people of this country who are eligible for the plan. We thank you for
what each of you play a role in making that possible. With that, the
hearing is adjourned.

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[Whereupon, at 6:45 p.m., the subcommittee was adjourned.]

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RESPONSES FOR THE RECORD SUBMITTED BY THE HON. MARK MCCLELLAN,
ADMINISTRATOR, CENTERS FOR MEDICARE & MEDICAID SERVICES

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