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entitled 'Medicare Part D: Opportunities Exist for Improving 
Information Sent to Enrollees and Scheduling the Annual Election 
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Report to the Chairman, Committee on Energy and Commerce, House of 
Representatives: 

United States Government Accountability Office: 
GAO: 

December 2008: 

Medicare Part D: 

Opportunities Exist for Improving Information Sent to Enrollees and 
Scheduling the Annual Election Period: 

GAO-09-4: 

GAO Highlights: 

Highlights of GAO-09-4, a report to the Chairman, Committee on Energy 
and Commerce, House of Representatives. 

Why GAO Did This Study: 

n Medicare Part D, enrollees in stand-alone prescription drug plans 
(PDPs) are allowed to switch plans during an annual coordinated 
election period (AEP) set under law from November 15 to December 31, 
with new coverage effective January 1. The Centers for Medicare & 
Medicaid Services (CMS) required that plan sponsors send an Annual 
Notice of Change (ANOC)—using either its model or a nonmodel 
format—before the 2008 AEP. Among other things, GAO examined: (1) 
stakeholders’ views of the model ANOC and CMS’s efforts to assure its 
effectiveness, and (2) how the scheduling of the AEP affects the 
enrollment process for beneficiaries switching PDPs. Among the largest 
PDP sponsors, we selected eight to interview along with other 
stakeholders involved in the AEP. We also obtained and analyzed data 
from CMS. 

What GAO Found: 

Sponsors, pharmacists, beneficiary advocates, and counselors GAO 
interviewed expressed concern that CMS’s model ANOC for the 2008 AEP 
did not effectively communicate drug plan changes to enrollees. They 
noted that it contained language at a reading level too high for some 
beneficiaries as well as too much, often irrelevant, information. To 
help ensure their enrollees understood how plan changes would affect 
them personally, two study sponsors mailed additional information 
detailing specific changes in coverage and costs for drugs the 
beneficiary took in the past year. Despite GAO’s previous 
recommendation that CMS ensure that its Part D materials meet 
communications guidelines, CMS’s process for developing its model ANOC 
did not include a systematic evaluation of its effectiveness. However, 
CMS officials reported that they recently initiated an evaluation of 
their annual Medicare beneficiary materials for the 2010 AEP that will 
examine reading levels, effectiveness, and length, among other factors. 
Such an evaluation is important in light of changes CMS has made for 
the 2009 AEP, which have raised further concerns among stakeholders. It 
is unclear whether alternative formats for communicating plan changes 
to beneficiaries will be considered. 

Although CMS and plan sponsors made improvements to the enrollment 
process, CMS data showed that about 15 percent of beneficiaries who 
chose to switch plans in the 2008 AEP were not fully enrolled in their 
new plan by January 1. Modifications to the enrollment process for the 
2008 AEP reduced the time needed to enroll beneficiaries in a new plan 
to a median of 5 days. However, the volume of applications submitted 
late in the AEP contributed to beneficiaries being at risk of not 
having access to their new coverage by January 1. In fact, among the 
beneficiaries who submitted applications after December 15, 40 percent 
were not completely processed until after the effective date of their 
new coverage. As a result, stakeholders reported that beneficiaries, 
pharmacies, and sponsors faced various operational challenges, 
including the risk of inaccurate charges and additional administrative 
burden. Some stakeholders we interviewed for our study said that 
creating an interval for enrollment processing between the end of the 
AEP and the effective date of coverage would help ensure that 
beneficiaries switching plans would have their coverage in place on 
January 1. 

Figure: Enrollments Completed during and after the 2008 AEP: 
 
[Refer to PDF for image] 

Start of AEP: November 15, 2007. 

Date: 11/15/2007; 
Number of beneficiaries: 16,656. 

Date: 11/26/2007; 
Number of beneficiaries: 54,352. 

Date: 12/3/2007; 
Number of beneficiaries: 148,323. 

Date: 12/11/2007; 
Number of beneficiaries: 325,003. 

Date: 12/17/2007; 
Number of beneficiaries: 540,938. 

Date: 12/24/2007; 
Number of beneficiaries: 688,551. 

Date: 12/31/2007; 
Number of beneficiaries: 842,190. 

Date: 1/1/2008 (Start of new coverage; 85% completed, 15% remain); 
Number of beneficiaries: 847,056. 

Date: 1/7/2008; 
Number of beneficiaries: 917,656. 

Date: 1/14/2008; 
Number of beneficiaries: 958,356. 

Source: GAO analysis of CMS data. 

[End of figure] 

What GAO Recommends: 

To improve the AEP, GAO recommends that CMS strengthen its evaluation 
of its model materials by reviewing alternative formats to communicate 
plan changes. Additionally, Congress should consider authorizing the 
Secretary of Health and Human Services to amend the AEP schedule to 
include a processing interval between the end of the AEP and the 
effective date of new coverage. In commenting on our draft, CMS stated 
that it concurs with our recommendation and will consider reviewing 
other ANOC formats. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-4]. For more 
information, contact Kathleen King at (202) 512-7114 or kingk@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Sponsors Were Timely in Mailing 2008 ANOCS to Nearly All Beneficiaries 
and Most Sponsors Used CMS's Model ANOC: 

Stakeholders Raised Concerns about the ANOC's Readability; CMS Did Not 
Assess the Effectiveness of Its Model ANOCs: 

Despite Improved Procedures, the AEP Schedule Does Not Allow Sufficient 
Time to Process All Enrollments: 

Conclusions: 

Matter for Congressional Consideration: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Comments from the Centers for Medicare & Medicaid Services: 

Appendix II: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: 2008 AEP Materials for Plan Enrollees: 

Figures: 

Figure 1: Hypothetical Example of a Personalized Mailing on Annual Plan 
Changes: 

Figure 2: Enrollment Applications Received by PDP Sponsors during 2008 
AEP, by Week: 

Figure 3: Enrollments Completed During and After the 2008 AEP: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

December 12, 2008: 

The Honorable John D. Dingell: 
Chairman: 
Committee on Energy and Commerce: 
House of Representatives: 

Dear Mr. Chairman: 

The Medicare Prescription Drug, Improvement and Modernization Act of 
2003 (MMA) established an outpatient drug benefit, known as Medicare 
Part D, that provides prescription drug coverage for beneficiaries who 
opt to enroll in the program.[Footnote 1] Congress designed Medicare 
Part D to be a market-driven program which promotes competition among 
private health plans. Of the roughly 25 million beneficiaries enrolled 
in Part D as of January 2008, about 17 million beneficiaries--those in 
traditional Medicare--received coverage through stand-alone 
prescription drug plans (PDPs).[Footnote 2] PDPs are offered by private 
entities, known as drug plan sponsors, that contract with the Centers 
for Medicare & Medicaid Services (CMS), the agency that administers the 
Medicare program within the Department of Health and Human Services 
(HHS). In its administration of Part D, CMS is responsible for 
implementing program requirements and overseeing plan sponsors' 
compliance with these requirements. 

Generally, beneficiaries enrolled in PDPs are only allowed to change 
their drug plan during the Part D annual coordinated election period 
(AEP).[Footnote 3] As required under federal law, the AEP runs from 
November 15 to December 31, with drug coverage under the elected new 
plan effective on January 1 of the next year.[Footnote 4] In 
considering their options, beneficiaries may have a choice of more than 
50 PDPs in the state where they live. Plans differ, for example, in the 
particular drugs covered, monthly premiums, or copayments beneficiaries 
are responsible for paying. 

Beneficiaries may consider changing their PDP plan for a variety of 
reasons, including changes in their health and prescription drug needs 
or modifications by their plan. Generally, sponsors make changes to 
benefits offered by their plans effective at the beginning of each 
benefit year.[Footnote 5] After the opportunity to change plans during 
the AEP, most beneficiaries enrolled in PDPs are locked into their plan 
for the benefit year. Thus, beneficiaries should determine whether 
drugs they previously used will continue to be covered, have increased 
copayments, or have any new access requirements in the next benefit 
year. In light of these types of changes, and without the opportunity 
to switch plans until the next AEP, it is important that enrollees 
evaluate whether their drug plans will continue to meet their needs. To 
this end, it is essential that CMS ensure that information sent to 
enrollees by plan sponsors prior to the AEP clearly and effectively 
communicates plan changes. 

To inform enrollees about their benefits for the coming year, CMS 
requires that sponsors mail enrollees an Annual Notice of Change (ANOC) 
for receipt by October 31. This document describes modifications to the 
plan's premium, drug coverage, cost sharing, and other features for the 
next benefit year. For the 2008 AEP that began November 15, 2007, 
sponsors could either adopt the model ANOC provided by CMS or create a 
nonmodel ANOC that included elements required by CMS that describe plan 
modifications.[Footnote 6] Nonmodel ANOCs were subject to a longer 
review period by CMS. The agency also required that sponsors mail 
enrollees an Evidence of Coverage (EOC) document, which details 
enrollees' benefits, rights, and responsibilities under a plan, for 
receipt by January 31, 2008. For the 2009 AEP starting November 15, 
2008, sponsors must use CMS's standardized ANOC and EOC, mailed 
together, so that enrollees receive them by October 31, 2008. Sponsors 
no longer have the option to use non-model materials. 

CMS's schedule provides beneficiaries with at least 2 weeks to review 
the ANOC prior to November 15--the first day plans can accept AEP 
enrollments. In addition, for the 2008 AEP CMS advised beneficiaries 
opting to change plans to do so by December 7--3 weeks prior to the 
official December 31 end date for the AEP. CMS recommended that 
beneficiaries apply to switch plans by early December to avoid 
potential problems in January, such as late or missing membership cards 
or inaccurate copayment charges that may result if their applications 
were not fully processed prior to January 1, 2008, the effective date 
of coverage. 

Despite the potential for cost increases or changes in drug coverage 
from year to year, the vast majority of enrollees do not switch their 
drug plans. In the 2008 AEP, about 1 million beneficiaries initiated a 
change from one PDP to another. You expressed concern about how 
beneficiaries are notified of plan benefit changes for the AEP. In this 
report, we reviewed the notices sent to enrollees as well as the 
enrollment process for those opting to switch between drug plans. 
Specifically, we examined: (1) sponsors' timeliness in mailing the ANOC 
for the 2008 AEP and the use of CMS's model, (2) stakeholders' views of 
CMS's model ANOCs and the extent to which the agency assures that they 
effectively communicate plan changes to beneficiaries, and (3) how the 
scheduling of the AEP affects the enrollment process for beneficiaries 
choosing to switch plans. 

To address these issues, we obtained information on the practices and 
experiences of sponsors, pharmacies, beneficiary advocates, and 
Medicare counselors during the 2008 AEP. We interviewed representatives 
from eight sponsors, each with 100,000 or more non-dual-eligible PDP 
enrollees as of November 2007, which together accounted for about 70 
percent of all non-dual-eligible PDP beneficiaries.[Footnote 7] 
Additionally, we spoke to associations representing pharmacists, 
pharmacy benefit management companies, and health plans. We also 
interviewed counselors who assist Medicare beneficiaries through the 
State Health Insurance Assistance Programs (SHIPs) in California, 
Texas, Florida, and New York, which were among the states with the 
largest number of PDP enrollees. Because we used selective samples of 
sponsors and SHIPs, our conclusions cannot be generalized to all PDP 
sponsors or SHIPs. 

We reviewed CMS's 2008 AEP "Readiness Checklist", which contains 
sponsor-reported information on compliance with ANOC mailing 
requirements, to determine PDP sponsors' timeliness. We also obtained 
sample ANOCs from our study sponsors along with templates of any 
supplementary documents addressing plan benefit changes that our study 
sponsors disseminated between September and December 2007. In addition, 
we asked sponsors and other stakeholders about their perspectives on 
CMS's 2008 and proposed 2009 AEP requirements, and reviewed their 
formal comments submitted to CMS. To learn about CMS's process for 
developing and evaluating ANOCs, we interviewed CMS officials 
responsible for beneficiary materials related to the AEP. We also 
reviewed previous GAO work on CMS's Part D communications and relevant 
literature on principles of effective communication with Medicare 
beneficiaries. To examine the effect of the AEP schedule on the 
enrollment process, we obtained CMS data on PDP beneficiaries who 
initiated a switch to another PDP during the 2008 AEP, including 
beneficiary application dates, as reported by PDP sponsors, and the CMS 
processing dates for enrollees changing plans. To assess the 
reliability of these data, we interviewed CMS officials responsible for 
the collection and analysis of the data, and we determined that the 
data were sufficiently reliable for purposes of this report. 

We conducted this performance audit from October 2007 through October 
2008 in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to provide a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our findings and conclusions based on our audit objectives. 

Results in Brief: 

For the 2008 AEP, PDP sponsors were timely in providing ANOCs to nearly 
all enrollees by October 31, 2007. CMS data indicate that 99.8 percent 
of the ANOCs for the 2008 AEP were on time. Of the eight sponsors in 
our study, six chose to use CMS's model ANOC largely for the 
convenience of undergoing a shorter CMS review period. The two 
remaining sponsors developed their own, nonmodel notices to 
beneficiaries. They found that the flexibility to produce nonmodel 
ANOCs allowed them to highlight particular features of their plans 
while presenting the required information on plan changes. 

Stakeholders expressed concerns regarding the readability of the ANOC 
and we found that CMS's process in developing the model ANOC did not 
include a systematic evaluation of its effectiveness, which we have 
previously demonstrated is needed for Part D materials. GAO's 2006 
study recommended that CMS ensure that its written materials follow 
commonly recognized communications guidelines. According to our study 
sponsors and other stakeholders, CMS's 2008 model ANOC was not 
sufficiently concise or beneficiary friendly and contained language at 
a reading level too high for some beneficiaries. Additionally, 
stakeholders noted that the model ANOC contained too much, often 
irrelevant, information that made it difficult for beneficiaries to 
determine how changes would affect them personally. To help ensure that 
enrollees understood how plan changes would affect their drug coverage 
and costs, two sponsors in our study supplemented the 2008 ANOC with 
personalized mailings that showed changes in coverage for specific 
drugs that the enrollees took in the past year. We found that CMS did 
not take steps to formally evaluate the ANOC used for the 2008 or 2009 
AEPs for effectiveness in communicating plan changes, citing inadequate 
resources and a lack of trained staff. CMS officials recently reported 
that on October 1, 2008, they initiated an evaluation of their annual 
Medicare beneficiary materials for the 2010 AEP to assess their reading 
levels, effectiveness, and length, among other factors. Such an 
evaluation is particularly important in light of changes CMS made for 
the 2009 AEP, which raised further concerns among stakeholders. 
However, it is unclear whether the evaluation will consider potential 
benefits of alternative formats for communicating plan changes to 
beneficiaries. 

Although CMS and plan sponsors made improvements to the enrollment 
process, about one in seven of the roughly 1 million beneficiaries who 
chose to switch PDPs during the 2008 AEP were not fully enrolled in 
their new plan by January 1, 2008, the effective date of coverage. CMS 
officials and sponsors reported modifications to the enrollment process 
for the 2008 AEP that reduced the time needed to enroll beneficiaries 
in a new plan compared to 2007. However, the volume of applications 
submitted late in the AEP combined with the processing time required 
contributed to about 15 percent of beneficiaries who switched plans 
being at risk of not having access to their new coverage on January 1. 
Compared to beneficiaries submitting applications earlier in the AEP, 
40 percent of the beneficiaries who submitted applications during the 
last 2 weeks of December were not completely processed until after the 
new benefit year began. Despite a median processing time of 5 days, the 
statutorily mandated AEP schedule--November 15 to December 31 with 
coverage effective January 1--provided insufficient time in which to 
fully process all enrollment applications. As a result, stakeholders 
reported inaccurate charges to beneficiaries, pharmacies, and sponsors 
as well as additional administrative burden. CMS officials and sponsors 
in our study agreed that creating an interval for enrollment processing 
between the end of the AEP and the effective date of new coverage would 
reduce the risk of these challenges. 

To improve the Part D AEP, Congress should consider authorizing the 
Secretary of HHS to amend the current AEP schedule to include a 
sufficient processing interval to fully enroll beneficiaries prior to 
the effective date of their new coverage. We also recommend that the 
Acting Administrator of CMS strengthen the agency's evaluation of its 
model materials by reviewing alternative formats that include 
personalized drug coverage and cost information. We provided a draft of 
this report to CMS for its review and comment. In its written comments, 
CMS stated that it concurred with our recommendation and will consider 
reviewing other ANOC formats. 

Background: 

The Medicare Part D Program: 

In the Medicare Part D program, drug plan sponsors compete to deliver 
prescription drug benefits and attract enrollees. Sponsors offer, 
through their PDPs, one or more benefit packages that differ in their 
levels of premiums, deductibles, cost sharing, and coverage in "the 
gap"--the period when beneficiaries would otherwise pay all of the 
costs of their drugs. Sponsors must offer plans with standard 
prescription drug coverage established under the MMA or actuarially 
equivalent prescription drug coverage as approved by CMS, or may opt to 
offer plans with supplemental prescription drug coverage.[Footnote 8] 
In 2008, only about 10 percent of PDPs--5 of 47--offered the defined 
standard coverage. 

Each plan must cover a set of drugs--generally known as a formulary-- 
that meets certain criteria.[Footnote 9] Beyond the minimum formulary 
requirements, sponsors have discretion in designing their formularies 
and may exclude particular drugs from coverage, thus contributing to 
variation in formularies across PDPs. For drugs included on a plan 
formulary, sponsors may assign drugs to tiers that correspond to 
different levels of cost sharing.[Footnote 10] In general, sponsors 
encourage the use of generic medications by putting them on a cost- 
sharing tier that imposes the lowest out-of-pocket costs on 
beneficiaries. 

PDP sponsors are required to implement drug utilization management 
programs to reduce cost when medically appropriate. As part of these 
programs, sponsors may apply various utilization management 
restrictions to specific drugs on their formularies. Utilization 
management restrictions may include (1) prior authorization, which 
requires the beneficiary to obtain the sponsor's approval before a drug 
is covered for that individual; (2) quantity limits, which restrict the 
dosage or number of units of a drug provided within a certain period of 
time; and (3) step therapy, which requires that a beneficiary try lower-
cost drugs before a sponsor will cover a more costly drug. 

2008 Plan Benefit Changes: 

From year to year, sponsors can make changes in their plans' benefit 
structure including premiums, cost-sharing levels, formularies, and 
utilization management restrictions. Prior to the AEP, plan sponsors 
must submit to CMS bids for approval in order to implement significant 
changes to benefit structures that will go into effect the next benefit 
year. As part of this bid negotiation process, CMS reviews formularies 
and the design of the plan and benefits offered, including removals of 
drugs from formularies, use of utilization management restrictions, and 
the application of copayments for drugs.[Footnote 11] Sponsors have 
limited opportunities to change benefit structures that may adversely 
impact enrollees, including removing particular drugs from formularies 
or moving drugs to higher cost-sharing tiers.[Footnote 12] 

Changes to plan benefit structures can have significant effects on a 
beneficiary's out-of-pocket costs and access to particular drugs. For 
example, a 2008 analysis conducted by Avalere Health--a health care 
research and consulting firm--showed that average monthly premiums in 
the 10 most popular Medicare PDPs increased by 16 percent from 2007 to 
2008.[Footnote 13] The analysis also noted that some of the most 
popular plans raised their premiums by more than 50 percent. 

In addition to changes in premiums, PDPs made significant changes from 
2007 to 2008 in cost sharing and utilization management of formulary 
drugs, according to a study sponsored by the Kaiser Family Foundation. 
[Footnote 14] For example, the study found that the average copayment 
for a 30-day supply of nonpreferred name-brand drugs increased 13 
percent from $63.31 in 2007 to $71.31 in 2008. Additionally, it 
reported that PDPs increased their use of utilization management 
restrictions, such as step therapy and quantity limits, from 25 percent 
of a sample of the most commonly prescribed drugs in 2007 to 30 percent 
in 2008.[Footnote 15] 

Written Communications for Medicare Beneficiaries: 

The design of written materials for Medicare beneficiaries is 
particularly important in light of evidence that some older individuals 
have challenges reading and retaining written information. For example, 
studies have found that individuals ages 65 and older were less 
proficient than younger adults in locating information in documents and 
making health decisions based on what they read.[Footnote 16] Further, 
a 2003 national survey of adult literacy showed that 27 percent of 
Medicare beneficiaries were unable to understand information in short, 
simple texts.[Footnote 17] 

Previous GAO work highlights the importance of assuring that Part D 
materials, in particular, communicate clearly to this population. 
[Footnote 18] Our 2006 study noted that the reading levels of a sample 
of Part D materials exceeded the capacity of 40 percent of the seniors 
surveyed. Additionally, the Part D materials reviewed in this study did 
not include about half of 60 common elements of effective 
communication, such as language that is free of jargon and consists of 
familiar words in short sentences, sometimes referred to as "plain 
language."[Footnote 19] As a result of these findings, we recommended 
that CMS ensure that its written materials describe the Part D benefit 
in a manner that is consistent with commonly recognized communications 
guidelines and is responsive to the reader's needs. 

Since the mid-1990s, a group of federal employees from different 
agencies and specialties has promoted the use of plain language in 
government communications, particularly those that describe federal 
benefits and services for the public.[Footnote 20] Documents that 
conform to principles of plain language are organized with the reader 
in mind and: 

* include only the information the reader needs; 

* omit unnecessary words and use short sentences of 15 to 20 words; 

* avoid technical terms and use simple words and active voice; 

* facilitate comprehension using headings, tables, lists, and white 
space; and: 

* incorporate customer feedback using surveys, focus groups, or 
protocol testing.[Footnote 21] 

Currently, no formal plain language initiative is in place for federal 
executive agencies; however, some agencies have chosen to incorporate 
plain language principles in their documents. For example, officials 
from CMS's Office of External Affairs indicated that they will conduct 
a plain language review of CMS documents if requested by agency staff. 

Other consumer research supported the use of information customized to 
individuals' preferences and circumstances to reduce the risk that 
consumers dismiss the information as irrelevant.[Footnote 22] Under 
this approach, consumers are provided with only data that are most 
relevant to them, thus making it less likely they will be overwhelmed 
by the information communicated. One study noted the importance of 
providing streamlined information that helps individuals understand the 
consequences of their choices.[Footnote 23] 

AEP Materials for Beneficiaries: 

CMS requires sponsors to mail all enrollees an ANOC that shows how 
various features of their drug plan--such as the premium, coverage, 
cost sharing, and formulary--will change for the next benefit year. 
[Footnote 24] In addition to the ANOC, sponsors are required to send 
beneficiaries other enrollment-related documents, such as the EOC, a 
Summary of Benefits (SB), and a comprehensive or abridged formulary. 
[Footnote 25] Table 1 describes selected information included in each 
of these documents, as prepared by sponsors in our study. 

Table 1: 2008 AEP Materials for Plan Enrollees: 

Document: Annual Notice of Change (ANOC); 
Selection of key information conveyed[A]: 
* How plan's monthly premium, prescription drug coverage, and cost 
sharing will change; 
* What enrollees should do if their drugs are no longer on the 
formulary or are in a more expensive cost-sharing tier; 
* Information on changes in costs for beneficiaries receiving financial 
assistance directly from Medicare to pay for drugs. 

Document: Evidence of Coverage (EOC); 
Selection of key information conveyed[A]: 
* Plan's service area, initial coverage limit, cost sharing under 
initial coverage limit, and cost sharing under the coverage gap; 
* General exclusions and restrictions (i.e., utilization management 
restrictions); 
* Description of the right to request coverage determination, and 
procedures for requesting a grievance, coverage determination, or 
appeal. 

Document: Summary of Benefits (SB); 
Selection of key information conveyed[A]: 
* An introduction and beneficiary information section, which provides 
information on who is eligible to join the plan, where enrollees can go 
to obtain their prescriptions, and enrollees' protections in the plan; 
* A benefit comparison matrix, which summarizes the benefit packages 
and premiums across the different plans offered by the sponsor. 

Document: Formulary (Abridged or Comprehensive)[B]; 
Selection of key information conveyed[A]: 
* Definition of a formulary and explanation of how to use the document; 
* Description of the plan's general utilization management policies and 
procedures; 
* Chart of covered drugs organized by therapeutic category that 
includes drug name, tier placement, and any utilization management 
restrictions. 

Source: GAO analysis of sample 2008 AEP materials provided by study 
sponsors. 

Notes: In this report we refer to the ANOC, the EOC, the SB, and an 
abridged or comprehensive formulary as AEP materials. However, for the 
2008 AEP, plan sponsors had the option to send the EOC to their 
enrollees by January 31. 

[A] The information selected does not include all of the elements of 
the listed documents. 

[B] In accordance with CMS guidelines, sponsors may provide 
comprehensive or abridged formularies to enrollees and indicate how 
enrollees may access a complete formulary. 

[End of table] 

For the 2008 AEP, sponsors could opt to mail the EOC along with the 
ANOC to beneficiaries for receipt by October 31, 2007, or separately 
mail the EOC to enrollees for receipt by January 31, 2008. If sponsors 
chose to mail EOCs separately, sponsors were required to mail a SB 
along with the ANOC. For the 2009 AEP, CMS required plan sponsors to 
mail the ANOC, a formulary, and the EOC together for receipt by 
enrollees by October 31, 2008.[Footnote 26] 

In developing these materials for the 2008 AEP, sponsors could choose 
to adopt CMS's model documents or create nonmodel documents that 
contained CMS's required elements. Sponsors are required to submit all 
AEP materials to CMS for review prior to mailing to enrollees. As a 
result, use of model versus nonmodel documents had implications for the 
amount of time for CMS review and the time frame for plan sponsors to 
mail materials. When sponsors used CMS model documents without 
modification, CMS reviewed the materials within 10 days; for documents 
considered nonmodel, CMS required a 45-day review period. For the 2009 
AEP, CMS required plan sponsors to use a standardized ANOC-EOC with no 
modifications to the text permitted. 

Sponsors Were Timely in Mailing 2008 ANOCS to Nearly All Beneficiaries 
and Most Sponsors Used CMS's Model ANOC: 

PDP sponsors reported to CMS that nearly all enrollees received their 
ANOCs on time for the 2008 AEP and most of our study sponsors used 
CMS's model ANOC. Our analysis of CMS's Readiness Checklist and 
information reported from certain sponsors indicated that 99.8 percent 
of the approximately 17.2 million PDP beneficiaries enrolled as of 
November 1, 2007, received ANOCs from their plan sponsors by the 
required October 31 deadline. Of the 35,630 beneficiaries who received 
ANOCs late, the majority (21,902) received them by November 15, 2007-- 
the start of the AEP--and the remainder received them by December 10,
2007.[Footnote 27] Given the limited delays in distributing ANOCs, CMS 
did not take enforcement action against any of the sponsors reporting 
late mailings for the 2008 AEP. 

Six sponsors in our study adopted CMS's model ANOC to inform 
beneficiaries of upcoming plan changes rather than develop their own 
ANOCs. Five of these six sponsors using the model reported doing so to 
qualify for a shorter CMS review period--10 days versus 45 days--and in 
some instances to help ensure that they could produce and send their 
ANOCs by the October 31 deadline. The remaining two study sponsors 
chose to develop nonmodel ANOCs for the 2008 AEP. Although their ANOCs 
contained all of CMS's required information elements, we found that 
they were substantially different in format from the CMS template and 
from each other. For example, these ANOCs contained sponsor-developed 
text rather than CMS's model language. Also, information was presented 
in a different order and with different section headings than CMS's 
model ANOC. These two sponsors told us that in electing to create 
nonmodel materials, such as the ANOC, they were able to highlight 
unique aspects of their plans. For example, one of the sponsors 
included information that one of its plans would begin covering the 
cost of administering Part D vaccines for the 2008 benefit year. 

Stakeholders Raised Concerns about the ANOC's Readability; CMS Did Not 
Assess the Effectiveness of Its Model ANOCs: 

Stakeholders have expressed various concerns regarding the readability 
of the ANOC and we found that prior to the 2008 and 2009 AEPs CMS did 
not systematically evaluate its effectiveness in conveying plan changes 
to beneficiaries. Stakeholders in our study noted that, because CMS's 
model ANOC was not beneficiary friendly, it was difficult for 
individuals to determine how changes would affect them personally. To 
help ensure that their enrollees understood the significance of plan 
changes, two sponsors in our study mailed supplemental information that 
showed changes in coverage and costs for the specific drugs the 
enrollee took in the past year. Although CMS used in-house experts when 
developing its model ANOC, the agency did not formally assess whether 
its 2008 model materials incorporated commonly recognized communication 
guidelines to effectively inform beneficiaries about plan changes. CMS 
officials recently reported that on October 1, 2008, they initiated an 
evaluation of their annual Medicare beneficiary materials-- 
particularly the combined ANOC-EOC for the 2010 AEP--to assess their 
reading level, effectiveness, and length, among other factors. Such an 
evaluation is particularly important in light of changes that CMS made 
for the 2009 AEP, which raised further concerns among stakeholders. 
However, it is unclear whether the evaluation will consider potential 
benefits of alternative formats for communicating plan changes to 
beneficiaries. 

Stakeholders Expressed Concern about the Readability of CMS Model ANOC: 

Five sponsors and other stakeholders in our study noted that CMS's 
model materials for the 2008 AEP were not sufficiently concise or 
beneficiary friendly and felt that the language in the model ANOC was 
at a reading level too high for some beneficiaries. One sponsor-- 
concerned about the reading level of the documents and the complexity 
of the language used--noted that the model ANOC contained some 
sentences with more than 40 words[Footnote 28]. According to another 
sponsor, the inclusion of excess information that did not contribute to 
understanding the benefit made it more likely that beneficiaries would 
become overwhelmed and less likely to find the information they need. 
Another sponsor stated that beneficiaries generally do not read the 
ANOC because it is a confusing document that lacks more basic 
information on plan changes and simpler language. Additionally, one 
study sponsor pointed out that the CMS model materials were not reader 
friendly or concise; it preferred to create its own simplified 
materials that use plain language and easy-to-read graphics and 
layouts. Similarly, stakeholders that assisted individuals during the 
AEP told us that some beneficiaries found the ANOC overwhelming and had 
difficulty processing the large amounts of information provided. Health 
care researchers, advocates, and SHIP counselors we spoke with 
concluded that much of the information contained in the model ANOC was 
too general in nature or irrelevant to the reader, making it hard for 
beneficiaries to determine how changes would affect them personally. 

To help ensure that enrollees understood their plan changes, two 
sponsors in our study provided additional information to beneficiaries 
that showed how coverage of their specific drugs would change in the 
next benefit year. For the 2008 AEP, these sponsors reported 
supplementing their use of the CMS model ANOC with additional 
personalized mailings distributed prior to and during the AEP. Using 
their pharmacy claims database, these sponsors reported producing 
documents that indicated whether the particular medications each 
beneficiary used in 2007 would continue to be covered in 2008. The 
documents also showed any changes in cost sharing and utilization 
management restrictions to be applied to these drugs in the new benefit 
year. These personalized mailings went to approximately 3.6 million of 
the 7.3 million PDP enrollees served by our study sponsors. Figure 1 
shows a hypothetical example that we created of a sponsor's mailing 
containing personalized information on changes for the next benefit 
year. 

Figure 1: Hypothetical Example of a Personalized Mailing on Annual Plan 
Changes: 

[Refer to PDF for image] 

Purple Heart Healthcare: 

Mr. John Doe: 
123 Main Street: 
Newtown, KS 12345: 

Dear Mr. Doe: 

This letter is a follow-up to the annual notice of change we sent you 
in October, 2007. To ease your transition to the new 2008 Medicare Part 
D benefit, we want to inform you of the following changes in 2008 based 
on a record of your claims paid in 2007. You do not need to take any 
action if you wish to remain in your current plan. 

Changes To Your Plan’s Premium: If you remain in your current plan, 
your monthly premium for 2008 will be $24.50. In 2007 it was $22.25. 

Changes Affecting Your Drug Coverage: 

Changes to your plan for 2008 will affect your drug coverage as shown 
here: 

This section of the document lists the drugs the beneficiary has used 
through the Part D benefit and indicates upcoming plan charges that 
will impact those drugs. 

All of my 2007 prescriptions: Warfarin Sodium; 
2007 Coverage? Yes; 
New 2008 Coverage? Yes; 
New 2008 Limitations? No; 
New 2008 Tier Changes? No change. 

All of my 2007 prescriptions: Azopt; 
2007 Coverage? Yes; 
New 2008 Coverage? Yes; 
New 2008 Limitations? No; 
New 2008 Tier Changes? Cost increase. 

All of my 2007 prescriptions: Omerprazole; 
2007 Coverage? Yes; 
New 2008 Coverage? Yes; 
New 2008 Limitations? No; 
New 2008 Tier Changes? No change. 

All of my 2007 prescriptions: Fosamax Plus D; 
2007 Coverage? Yes; 
New 2008 Coverage? Yes; 
New 2008 Limitations? No; 
New 2008 Tier Changes? No change. 

All of my 2007 prescriptions: Norvasc; 
2007 Coverage? Yes; 
New 2008 Coverage? Yes; 
New 2008 Limitations? Yes: Quantity limit; 
New 2008 Tier Changes? Cost Increase. 

You have the option to switch to another Part D plan during the Annual 
Election Period (AEP), which runs from November 15 to December 31, 
2007. For more information on other plans available in your area, call 
1-800-MEDICARE or visit www.medicare.gov. 

If you have any questions about these changes, please call us at 1-800-
XXX-XXXX between 8 AM and 9 PM EST, Monday through Saturday. 

Sincerely, 

Purple Heart Healthcare, INC. 

Source: GAO analysis of literature from two plan sponsors. 

Note: This hypothetical notice contains features from both sponsors' 
mailings to their enrollees. 

[End of figure] 

One of the two sponsors reported including personalized drug 
information as a separate communication to beneficiaries shortly after 
the ANOC was sent. This sponsor sent these personalized mailings only 
to those beneficiaries whose drugs would undergo coverage changes for 
the upcoming year. Sponsor staff told us they created personalized 
mailings because they made substantial modifications to their 
formularies for 2008 and they wanted to make certain that beneficiaries 
were aware of these changes. 

Similarly, the other sponsor reported that it wanted to ensure that 
beneficiaries would not be surprised by drug benefit changes effective 
in January and thus felt that it was important to provide more 
information than required by CMS. This sponsor inserted personalized 
information on upcoming plan changes in its monthly Explanation of 
Benefits (EOB) sent to beneficiaries in October, November, and December 
2007.[Footnote 29] The sponsor reported that it sought to communicate 
information in a succinct format to enable beneficiaries to focus only 
on the plan changes relevant to them, individually, without having to 
examine the longer plan formulary document. Additionally, this sponsor 
had conducted focus groups to identify the specific information 
elements, such as individual drug coverage and cost changes, 
beneficiaries look for when reviewing their plan notices. Sponsor staff 
noted that they chose to supplement the EOB with this information 
because industry research indicated that readership of the EOB is high--
90 to 95 percent. 

CMS Has Not Assessed Effectiveness of ANOCs, Which May Be More Critical 
in Light of Changes to 2009 AEP Materials: 

Agency officials told us that they had not systematically evaluated the 
effectiveness of the agency's ANOCs or incorporated beneficiary 
feedback or the principles of plain language. Instead, in developing 
the 2008 model, CMS officials said the agency relied on in-house 
expertise gained through the development of other Medicare materials. 
They reported making slight wording modifications to the draft 2008 
ANOC based on comments from the agency's Office of External Affairs, 
but said that plain language review was not part of the document 
clearance process. CMS officials said they recognize the need to 
incorporate feedback from beneficiaries and increase the use of 
commonly recognized elements of plain language in their documents. 
However, they cited a lack of adequate in-house resources to conduct 
consumer testing. Additionally, a CMS official cited an insufficient 
number of staff to meet additional requests for plain language review. 

After the release of standardized materials for the 2009 AEP, a CMS 
official reported that the agency had awarded a contract for an 
evaluation of its annual Medicare beneficiary materials--particularly 
the combined ANOC-EOC--which CMS required sponsors to send to 
beneficiaries in a single mailing for the 2009 AEP.[Footnote 30] The 
official also noted that this assessment began on October 1, 2008, and 
is to be completed by February 2009. According to the contract and CMS 
officials, this evaluation will redesign and standardize beneficiary 
materials including the ANOC-EOC to provide more understandable 
information to beneficiaries.[Footnote 31] CMS officials indicated that 
the redesigned ANOC-EOC should be completed for the 2010 AEP. 

This effort by CMS is particularly important in light of changes that 
CMS has made for the 2009 AEP, which raised further concerns among 
stakeholders. One such change requires that sponsors use only a 
standardized ANOC, rather than giving sponsors the option of creating 
their own. In adopting this standardized document, sponsors may insert 
plan-specific information where appropriate, but cannot otherwise 
modify the language. According to CMS, this standardization is 
consistent with the materials for the Federal Employees Health Benefits 
Program (FEHBP). Additionally, the agency expects the required use of a 
standardized ANOC to reduce misinformation on plan changes because this 
document was more likely to contain errors than other documents 
submitted to CMS for review. CMS also expects this change to speed its 
review of materials by eliminating the 45-day review of nonmodel 
materials. When sponsors use CMS standardized documents without 
modification they are available for use 5 days after submission to CMS. 

While one sponsor and two beneficiary advocates supported greater 
standardization, six of the eight sponsors expressed concerns that the 
2009 ANOC requirements will render notices to beneficiaries less 
effective in communicating plan changes. In formal written comments to 
CMS and in interviews on the proposed changes for the 2009 AEP, some 
study sponsors noted that the mandatory use of CMS's standardized 
documents requires the use of language already considered to be at a 
reading level that is too high for some beneficiaries. Additionally, 
two sponsors told us that, in the past, they have conducted focus 
groups with their enrollees on the clarity of their materials. They 
pointed out that the requirement to use only standardized materials 
prevents them from developing an ANOC that incorporates enrollees' 
feedback and provides information in a way that they believe would 
enhance beneficiaries' comprehension of plan changes. 

Some of these concerns may be addressed in CMS's forthcoming evaluation 
of the combined ANOC-EOC. The contract includes the development of 
beneficiary materials at an appropriate reading level and that 
incorporates plain language principles. Additionally, a CMS official 
said that the evaluation will involve in depth interviews with 
consumers in an effort to develop more effective beneficiary materials 
for PDP enrollees. The interviews will include special populations such 
as dual eligibles. 

Another change CMS implemented for the 2009 AEP was a requirement that 
the EOC be sent to beneficiaries with the ANOC in a single mailing. For 
the 2008 AEP, sponsors had the option to mail a short Summary of 
Benefits (SB) with the ANOC in October and follow this with the more 
detailed EOC in January. For the 2009 AEP, CMS requires all sponsors to 
mail to beneficiaries the ANOC and EOC together for receipt by October 
31; the SB will be available to beneficiaries only upon request. 
According to CMS, this change gives beneficiaries comprehensive 
information on their current plan in advance of the AEP. Furthermore, 
CMS considers the EOC a resource document that beneficiaries will keep 
and refer to as appropriate. 

Sponsors, advocates, and SHIPs expressed concern that sending the ANOC 
and EOC as one mailing results in a lengthy document that could confuse 
some beneficiaries and deter others from reading the materials. Because 
CMS's new set of required materials replaces the abbreviated SB 
(approximately 4 pages in length) with the more detailed EOC (that 
could be more than 100 pages in length), the size of sponsors' mailings 
for the AEP could grow from about 51 pages in 2008 to about 86 pages in 
the 2009 AEP.[Footnote 32] One sponsor noted that beneficiaries want 
information about changes that affect them significantly, such as 
changes to their formulary or cost-sharing responsibility. Another 
sponsor cited the importance of highlighting changes to step therapy 
and prior authorization for beneficiaries. These sponsors expressed 
concern that the long combined ANOC-EOC may not be useful for 
beneficiaries in understanding such changes. 

According to the contract and CMS officials, the evaluation of 
beneficiary materials including the ANOC-EOC requires the development 
of shorter documents. However, it is unclear whether the evaluation 
will include an examination of alternatives such as the use of specific 
information tailored to the individual--an approach favored by 
communications researchers. It is also unclear whether the evaluation 
will include an assessment of the decision to combine the ANOC and EOC 
mailings despite concerns expressed in comments to CMS on the draft 
2009 call letter. 

Despite Improved Procedures, the AEP Schedule Does Not Allow Sufficient 
Time to Process All Enrollments: 

Despite improved AEP enrollment procedures, one in seven of the 
approximately 1 million beneficiaries choosing to switch PDPs were not 
fully enrolled in their new plan by January 1. CMS and sponsors made 
modifications to the enrollment process that resulted in a median 
processing time of 5 days for applications submitted throughout the 
2008 AEP. However, the statutorily mandated AEP schedule--November 15 
to December 31 with coverage effective January 1--lacks sufficient time 
in which to fully process enrollment applications. As a result, 
stakeholders reported inaccurate charges, additional administrative 
burden, and inconveniences for the beneficiary following the 2008 AEP. 
CMS officials and sponsors in our study agreed that creating an 
interval for enrollment processing between the end of the AEP and the 
effective date of new coverage would reduce the risk of these 
challenges. 

CMS and Sponsors Improved Procedures to Reduce Enrollment Processing 
Time: 

For the 2008 AEP, CMS and sponsors implemented changes to expedite 
enrollment processing in order to avoid difficulties encountered the 
previous year.[Footnote 33] To be fully enrolled in a new plan a 
beneficiary must submit a complete application, eligibility must be 
verified by sponsors and CMS, billing codes must be assigned and 
disseminated, adjustments must be made to premium amounts and any 
relevant subsidies, and the beneficiary must receive documentation of 
new coverage, in the form of either a confirmation letter or a new 
membership card. The complete processing of an enrollment application 
requires data exchanges among not only CMS, sponsors, and pharmacies, 
but also the Social Security Administration (SSA), state Medicaid 
programs for certain beneficiaries, and various CMS contractors. 
[Footnote 34] The multiple data exchanges among partners that are 
necessary for processing a beneficiary's change in plans occur 
sequentially over a period of time.[Footnote 35] 

A previous study by GAO on Part D complaints and grievances found that 
63 percent of the complaints received by CMS over an 18-month period 
cited problems related to processing beneficiary enrollments and 
disenrollments.[Footnote 36] We noted that CMS received numerous 
complaints about late or missing membership cards, incorrect 
enrollments and disenrollments, inaccurate premiums, involuntary 
switching, and problems regarding cost-sharing amounts. To address 
concerns, CMS continually works with its partners through work groups, 
task forces, and coalitions to improve program quality and improve Part 
D processes. 

The changes CMS implemented for the 2008 AEP reduced the time needed 
for processing enrollments by at least 14 days, compared to the 
previous year. CMS achieved this reduction by requiring sponsors to: 

* transmit new enrollment information to CMS "as early as possible" or, 
at most, within 7 days instead of the 14 days permitted during the 2007 
AEP; 

* contact beneficiaries regarding missing information within 10 days of 
receipt versus 21 days as previously required; and: 

* provide beneficiaries with information on their enrollment in a new 
plan from CMS's earliest notification, which is likely to be the weekly 
report, rather than waiting for CMS's monthly report as previously 
permitted. 

In addition, CMS improved the process by requiring sponsors to assign 
billing codes to new enrollments earlier in the process.[Footnote 37] 
Pharmacies need these codes in order to identify and charge the 
appropriate plan and collect the correct copayment amounts from 
beneficiaries. Previously, sponsors assigned this information at 
various times and in separate transactions that sometimes followed 
CMS's confirmation of a beneficiary's Part D eligibility by as much as 
14 days, delaying availability of billing codes at the pharmacy. In 
contrast, for the 2008 AEP, the agency required sponsors to submit the 
billing codes for each beneficiary simultaneously with the initial 
enrollment transaction. Since 2006, CMS has required sponsors to 
include this information on the acknowledgement and confirmation 
letters sent to beneficiaries informing them of the effective date of 
their new coverage. These letters could be used by pharmacists to 
verify coverage prior to the beneficiaries' receipt of their new plan 
membership cards. Streamlining the assignment of the billing codes 
significantly decreased the time to complete enrollment processing and 
increased overall program efficiency. 

Four sponsors in our study also took steps to complete AEP enrollments 
and transmit the billing codes to their claims systems prior to 
receiving the weekly report from CMS confirming eligibility.[Footnote 
38] Two sponsors went further to expedite enrollments by establishing 
processes to independently obtain information needed to complete an 
application or verify enrollees' eligibility for Part D. Because these 
sponsors did not wait for CMS to confirm eligibility via their weekly 
or monthly reports, they were able to provide pharmacies with 
information regarding a beneficiary's new coverage more quickly. 

Additional time-saving modifications to the enrollment process 
identified by CMS officials and sponsors in our study included: 

* use of customer service representatives to complete telephone 
enrollments, conduct the preliminary eligibility check required by CMS, 
and ask the caller pertinent questions; 

* more detailed beneficiary information provided by CMS to sponsors in 
the initial eligibility query;[Footnote 39] 

* more detailed information provided to pharmacies by CMS and sponsors 
during the query used to obtain billing information for beneficiaries 
without membership cards or other documentation of coverage;[Footnote 
40] 

* increased staffing during December to manage the volume of late-month 
enrollments; and: 

* automation of certain tasks to reduce processing time. 

Not All Beneficiaries Switching Plans Were Fully Enrolled Before Their 
New Coverage Began: 

Despite these improvements, we found that 15 percent of the 
approximately 1 million beneficiaries choosing to switch plans during 
the 2008 AEP were at risk of not having access to their new coverage on 
January 1, 2008. Reasons for these delayed enrollments included the 
volume of late-December applications combined with the processing time 
required to fully enroll a beneficiary in a new plan, and the AEP 
schedule that accepts enrollments through December 31 with coverage 
effective the next day.[Footnote 41] To prevent problems in January 
resulting from these delays, in 2007 CMS sponsored a media campaign and 
distributed guidance to its partners to encourage beneficiaries to 
submit their 2008 AEP applications by December 7, 2007. Despite this 
effort, CMS weekly report data revealed that 50 percent of the 
applications to change PDPs were received after December 10. 
Furthermore, sponsors received 5 percent of enrollment applications for 
beneficiaries during the last 2 days of the AEP. Figure 2 shows the 
distribution of enrollment applications received during the 2008 AEP. 

Figure 2: Enrollment Applications Received by PDP Sponsors during 2008 
AEP, by Week: 

[Refer to PDF for image] 

This figure is a vertical bar graph depicting the following data: 

Enrollment Applications Received by PDP Sponsors during 2008 AEP, by 
Week: 

CMS weeks: 1; 
Number of applications: 132,561. 

CMS weeks: 2; 
Number of applications: 54,246. 

CMS weeks: 3; 
Number of applications: 101,409. 

CMS weeks: 4; 
Number of applications: 169,785. 

CMS weeks: 5; 
Number of applications: 222,211 (50% of all applications were received 
after December 10). 

CMS weeks: 6; 
Number of applications: 142,200. 

CMS weeks: 7; 
Number of applications: 108,987 (15% of all applications were received 
after December 25). 

CMS weeks: 8; 
Number of applications: 54,121 (5% of all applications were received on 
December 30 and 31). 

Source: GAO analysis of CMS data. 

Note: The weeks shown reflect enrollment application dates by week 
reported by sponsors to CMS throughout the AEP. The first and last 
weeks of the 2008 AEP covered less than 7 days; week 1 includes data 
from November 15 through November 17 and week 8 includes data from 
December 30 to December 31. 

[End of figure] 

CMS data also show that the time needed to fully process an enrollment 
application varied over the course of the AEP. Overall, the median 
processing time was 5 days. However, in week 1 of the AEP the median 
processing time was 20 days and in week 5 the median was 3 days. 

Of the applications received after December 15--which accounted for 
nearly one third of all 2008 AEP applications--40 percent were not 
processed until after January 1. On average, applications received in 
late December took 3 days longer to process than applications received 
earlier in the month. Not until January 11--2 weeks into the new 
coverage year, did CMS and its partners complete the processing of 97 
percent of the applications of beneficiaries choosing to switch PDPs 
during the 2008 AEP.[Footnote 42] Figure 3 shows when enrollment 
processing for the 2008 AEP was completed. 

Figure 3: Enrollments Completed During and After the 2008 AEP: 

[Refer to PDF for image] 

Enrollments Completed during and after the 2008 AEP: 

Start of AEP: November 15, 2007. 

Date: 11/15/2007; 
Number of beneficiaries: 16,656. 

Date: 11/26/2007; 
Number of beneficiaries: 54,352. 

Date: 12/3/2007; 
Number of beneficiaries: 148,323. 

Date: 12/11/2007; 
Number of beneficiaries: 325,003. 

Date: 12/17/2007; 
Number of beneficiaries: 540,938. 

Date: 12/24/2007; 
Number of beneficiaries: 688,551. 

Date: 12/31/2007; 
Number of beneficiaries: 842,190. 

Date: 1/1/2008 (Start of new coverage; 85% completed, 15% remain); 
Number of beneficiaries: 847,056. 

Date: 1/7/2008; 
Number of beneficiaries: 917,656. 

Date: 1/14/2008; 
Number of beneficiaries: 958,356. 

Source: GAO analysis of CMS data. 

[End of figure] 

The capacity to process late December enrollments also varied across 
sponsors. We found that larger sponsors were quicker in processing 
enrollments received after December 15. Thus, sponsors with more than 3 
million PDP beneficiaries were able to process 81 percent of late 
December applications prior to the effective date of new coverage. In 
contrast, sponsors with less than 100,000 PDP enrollees were able to 
process 48 percent of applications before the new year. Regardless of 
sponsor size, the AEP schedule provided insufficient time in which to 
fully process all enrollment applications. 

The inability of CMS and sponsors to complete all the steps in the 
enrollment process prior to the effective date of new coverage for 
beneficiaries choosing to switch plans created a number of challenges. 
One consequence is the heightened risk of inaccurate charges or payment 
amounts for beneficiaries, pharmacies, and sponsors. Following the 2008 
AEP, beneficiary advocates, SHIPS, and pharmacists reported that some 
individuals were charged the wrong copayment or deductible, especially 
those who had applied for a low-income subsidy-
-which must be authorized by SSA--to reduce their cost-sharing levels. 
Two pharmacy associations reported that if new coverage could not be 
verified, their members risked filling a prescription for which they 
would not get reimbursed or the beneficiary would need to pay for a 
temporary supply of the medication while coverage issues were resolved. 
Pharmacy association representatives also reported delayed receipt of 
payment from sponsors related to prescriptions filled when a 
beneficiary's enrollment status changed. In addition, stakeholders told 
us about significant payment inaccuracies that took time to resolve. 
[Footnote 43] 

Additional administrative burden was another consequence of the 
incomplete processing of all AEP enrollments prior to January 1, 
according to several stakeholders we interviewed. Until beneficiaries 
switching plans received documentation of their new coverage from the 
sponsor on a membership card or letter, pharmacies had to use 
alternative means to locate the updated enrollment and billing 
information in order to fill a prescription and submit a claim 
correctly. CMS guidance requires pharmacists to complete electronic 
inquiries and, if necessary, phone calls to try to identify the 
beneficiary's correct enrollment status and billing codes if that 
information is not in the claims system. Pharmacy associations reported 
that this procedure was overly complex and required extensive staff 
time. Sponsors and pharmacy associations said that claims filed under a 
beneficiary's old plan had to be reversed retroactively and charged to 
the correct plan, requiring additional time and resources. Stakeholders 
we interviewed noted that beneficiaries lack a single point of contact 
to resolve enrollment issues promptly and might need to follow up with 
multiple sources including their plan, CMS, SSA, and the prescribing 
physician. 

Stakeholders Favor Changes to the AEP Schedule to Better Manage Plan 
Switching: 

CMS, sponsors, pharmacy associations, SHIPS, and beneficiary advocates 
recognize that the current AEP schedule--November 15 through December 
31--is problematic. Some stakeholders we interviewed in our study said 
that creating an interval for enrollment processing between the end of 
the AEP and the effective date of coverage would help ensure that 
coverage for a beneficiary switching plans would be in place on January 
1. Additional time for enrollment processing would also help 
beneficiaries receive their new membership information prior to the 
effective date of coverage. In addition, we recently reported that such 
an interval may address some challenges that result from premium 
withholdings from Medicare beneficiaries' Social Security checks. 
[Footnote 44] Requiring a "quiet period" is standard practice in 
private health insurance and other federal health programs, allowing 
sponsors time to process applications and provide enrollees appropriate 
information about their new coverage prior to its effective date. For 
example, in Medicare Part B,[Footnote 45] open enrollment is followed 
by a 3-month processing interval that extends from March 31 to July 1. 
Similarly, in the FEHBP, enrollment is followed by approximately a 3- 
week processing interval that extends from the second Monday in 
December to January 1. 

More than half the sponsors interviewed supported the creation of an 
enrollment processing interval. CMS officials and two sponsors 
recommended ending enrollment in mid December, while two other sponsors 
suggested ending the AEP on November 30. Stakeholders also noted that 
some of the difficulties associated with an AEP schedule that includes 
the end-of-the-year holidays could be avoided with an earlier end date. 

Several sponsors recommended an earlier start date to address concerns 
they have regarding CMS's guidance prohibiting sponsors from processing 
applications submitted between the receipt of the ANOC (October 31) and 
the beginning of the AEP (November 15). Although CMS officials told us 
they expected beneficiaries to use this time to become informed about 
their choices, sponsors reported that this waiting period was 
inconvenient for those beneficiaries who were prepared to make an 
enrollment change. Similarly, SHIP counselors pointed out that they too 
must wait until November 15 to forward beneficiaries' completed 
applications. SHIP counselors in one state reported that the need to 
double check enrollment applications completed prior to November 15 
limited the number of Part D beneficiaries they were able to assist 
during the AEP. However, stakeholders noted that starting the AEP 
earlier would have implications for the preceding AEP deadlines. 

Conclusions: 

Effective written communication about plan changes helps beneficiaries 
determine whether their current PDP will continue to meet their needs 
and may reduce the risk of surprises at the pharmacy when beneficiaries 
fill their prescriptions in the new benefit year. From a program 
perspective, beneficiaries must be sufficiently aware of plan changes 
in order to fully use their ability to switch plans to foster the 
competition that Congress intended in designing the Part D program. To 
this end, CMS designed a model ANOC to provide a consistent format for 
the information sent to beneficiaries about upcoming plan changes. 
Sponsors as well as advocates have voiced concerns that the model 
lacked the attributes--particularly simplicity and personalization-- 
that researchers say are needed for beneficiaries to understand and act 
on the information provided. Although CMS told us that they recently 
initiated an evaluation of its annual notification materials, it is 
unclear whether alternative formats for the ANOC-EOC will be 
considered. Based on our findings as well as research on the need to 
make information relevant to the reader, CMS's evaluation should 
consider alternative models that incorporate a beneficiary's personal 
drug information. Such an alternative may be more effective in 
highlighting key changes in drug costs and coverage for plan enrollees. 
Two sponsors in our study supplemented the 2008 ANOC by mailing 
additional information on specific drug coverage and cost changes to 
nearly 3.6 million enrollees, thus demonstrating the feasibility of 
providing such personalized information to their members. 

Although CMS and sponsors implemented improvements to better manage the 
2008 AEP enrollment process, their efforts are hampered by a schedule 
that lacks a sufficient interval in which to complete processing 
beneficiary enrollment changes prior to the effective date of new 
coverage. Under the current mandated schedule, it is not possible to 
guarantee that beneficiaries choosing to switch plans late in December 
are fully enrolled in their new plans with pharmacists having 
sufficient evidence of the new coverage by January 1. In addition, 
sponsors and pharmacies reported excessive administrative complexity 
and diminished program efficiency as a result of the nearly 15 percent 
of enrollments still in process in January. Stakeholders agree that 
modifying the schedule and creating an interval between the end of the 
AEP and the effective date of coverage would minimize these challenges 
as well as mitigate issues related to low-income subsidies and premium 
withholding from beneficiaries' Social Security checks. Establishing a 
processing interval would be consistent with the open enrollment 
periods in Medicare Part B, the FEHBP, and commercial insurance and 
create a more streamlined program to better serve beneficiaries. 

Matter for Congressional Consideration: 

To improve the Part D enrollment process, Congress should consider 
authorizing the Secretary of HHS to amend the current AEP schedule to 
include a sufficient processing interval to fully enroll beneficiaries 
prior to the effective date of their new coverage. 

Recommendation for Executive Action: 

To ensure that beneficiaries are informed effectively of plan changes, 
we recommend that the Acting Administrator of CMS strengthen the 
agency's evaluation of the ANOC-EOC by reviewing alternative formats 
that include personalized drug coverage and cost information. 

Agency Comments and Our Evaluation: 

We provided CMS with a draft of this report for their review and 
comment. The agency provided written comments, which have been 
reprinted in appendix I. It also provided technical comments that we 
incorporated as appropriate. 

CMS concurred with our recommendation and agreed that beneficiaries 
need plan benefit information that is easy to read and understand. The 
agency noted that its process for developing the model ANOC and the EOC 
included a review of other programs' model materials such as those used 
in the FEHBP, as well as restructuring the model to eliminate 
duplication and increase readability. CMS pointed out that, in 
preparation for the 2010 AEP, it has engaged a contractor to evaluate 
and improve the required notification materials sent to beneficiaries. 
CMS expects this evaluation to further address issues of length and 
readability. The contractor will obtain input from beneficiaries as 
part of its effort to redesign the ANOC for the 2010 AEP. 

Citing the near perfect timeliness rate for plans' 2008 AEP ANOC 
mailing, CMS asserted that beneficiaries had the information they 
needed to make informed decisions about their plan options. However, we 
remain concerned that despite this timeliness, the volume and 
complexity of documents exceeding 100 pages continue to pose challenges 
for some beneficiaries. While CMS's effort to evaluate the ANOC-EOC is 
an important, worthwhile step, such a review would benefit by a focus 
on streamlining as opposed to maximizing the amount of information that 
beneficiaries receive. Beyond the current evaluation, CMS should 
continue its efforts to improve the understandability of its AEP 
materials by testing more concise formats with beneficiaries. As we 
note in this report, a single-page, customized model that shows each 
beneficiary's drug use and any upcoming changes in coverage and costs 
may more clearly communicate the essential information Part D 
beneficiaries need to be adequately informed. 

CMS acknowledged the challenges inherent in the current AEP schedule. 
The agency reiterated its strategies for ensuring that beneficiaries 
are able to access their new plan benefits while their enrollment is 
still being processed. For example, CMS highlighted its consistent 
efforts to encourage beneficiaries to submit their enrollment 
applications by early December. However, as we discuss in this report, 
one consequence of this approach is a reduction in the amount of time 
beneficiaries have to consider and enroll in an alternative plan that 
could better meet their needs. 

We are sending copies of this report to the Administrator of CMS, 
committees, and others. The report also is available at no charge on 
the GAO Web site at [hyperlink, http://www.gao.gov/]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made major contributions to 
this report are listed in appendix II. 

Sincerely, 

Signed by: 

Kathleen M. King: 
Director, Health Care: 

[End of section] 

Appendix I: Comments from the Centers for Medicare & Medicaid Services: 

Department Of Health & Human Services: 
Office Of The Secretary: 
Assistant Secretary for Legislation: 
Washington, DC 20201: 

December 2, 2008: 

Kathleen M. King: 
Director, Health Care
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Ms. King: 

Enclosed are the Department's comments on the U.S. Government 
Accountability Office's (GAO) draft report entitled: "Medicare part D: 
Opportunities Exist for Improving Information Sent to Enrollees and 
Scheduling the Annual Election Period" (GAO 09-04). 

The Department appreciates the opportunity to comment on this draft 
report before its publication. 

Sincerely, 

Signed by: 

Jennifer R. Luong, for: 

Vincent J. Ventimiglia, Jr. 
Assistant Secretary for Legislation: 

Attachment: 

Department Of Health & Human Services: 
Centers for Medicare and Medicaid Services: 
200 Independence Avenue, SW: 
Washington, DC 20201: 

Date: December 2, 2008: 

To: Vincent J. Ventimiglia. Jr. 
Assistant Secretary for Legislation: 
Department of Health and Human Services: 

From: [Signed by] Kerry Weems: 
Acting Administrator: 

Subject: Government Accountability Office (GAO) Draft Report: "Medicare 
Part D: Opportunities Exist for Improving Information Sent to Enrollees 
and Scheduling the Annual Election Period" (GAO-09-4) 

Thank you for the opportunity to review and comment on the GAO Draft 
Report, "Medicare Part D: Opportunities Exist for Improving Information 
Sent to Enrollees and Scheduling the Annual Election Period" (GAO-09-
4). The Centers for Medicare & Medicaid Services (CMS) reiterates its 
commitment to ensuring that Medicare beneficiaries arc provided timely 
and accurate information about the Medicare Prescription Drug Benefit 
Program and appreciates the GAO's interest in assessing the model 
Annual Notice of Change (ANOC) for the 2008 Annual Election Period 
(AEP) that is provided to enrollees in stand-alone Medicare 
Prescription Drug Plans (PDPs). 

We concur with GAO's recommendation and agree that beneficiaries need 
information that is easy to read and understand. While, the ANOC is a 
standardized document. the standardization relates to the structure of 
the document and is not intended to prevent plans from providing useful 
information to beneficiaries. In fact. plans are provided with the 
opportunity to provide plan-specific information within designated 
areas of the ANOC. We would also like to clarify that although consumer 
research and testing of model documents was limited, there was a 
careful and thoughtful process in developing the model ANOC and the 
Evidence of Coverage (EOC). This development process included the 
review of other existing models such as those used in the Federal 
Employees Health Benefits Program, as well as restructuring several 
models to eliminate duplication and increase readability to better 
ensure understanding of the benefits and services offered. 

While we acknowledge that additional communications research could 
assist in modifying model documents, we do believe these documents 
clearly convey key information needed to help beneficiaries understand 
their health care benefits and future changes. Given the complex nature 
of the Medicare Program, the ultimate goal is to ensure that 
beneficiaries are provided with all of the information they need to 
fully understand their health care options in an easy-to-read and 
understandable way. 

To this end. we have already taken steps to ensure that beneficiary 
notification materials for 2010 will be easier to understand and 
include the information necessary for beneficiaries to make an informed 
decision. CMS has procured a contractor to evaluate the effectiveness 
of the ANOC and to assist in redesigning the document. This process 
will include conducting intensive beneficiary interviews to help ensure 
content is understandable and plan-specific benefit information is 
adequately disclosed. 

The draft GAO report indicates that stakeholders suggested the model 
ANOC contains too much. and sometimes irrelevant, information. We would 
emphasize that CMS does have a formal process through which health 
plans, beneficiary advocacy groups, and trade organizations may comment 
on the draft ANOC prior to the document's final release. CMS carefully 
considers those comments, and many are incorporated into the final 
model ANOC. 

The draft GAO report also implies that as a consequence of problems 
with the ANOC/EOC beneficiaries did not have the information needed to 
review their coverage during the open enrollment period. Given that 
99.8 percent of the ANOCs were mailed timely, we believe that 
beneficiaries had the information in time to make an informed decision 
about their health care options. In addition, it was stated that the 
new rules for the combined ANOC/EOC do not provide for beneficiary 
protection. We disagree since the new requirement provides additional 
protection for beneficiaries to receive comprehensive information prior 
to the annual election period. 

The report highlights the need to reduce enrollment delays and the 
impact on beneficiaries when a new coverage year begins. As noted in 
the report, the statute requires that enrollments received as late as 
December 31 be effective the following January 1. CMS recognizes that 
this presents challenges for plans and beneficiaries. Therefore, in the 
2006 AEP we took steps to ensure that our model acknowledgement and 
confirmation letters included the necessary billing information so that 
beneficiaries could access services even while their enrollment was 
still being processed by the plan. To help mitigate this issue, we have 
consistently encouraged beneficiaries to submit their enrollment 
applications by early December instead of waiting until later in the 
month. In addition, in a November 13, 2008 HPMS memorandum, we reminded 
plans that we expect them to frequently submit batch tiles for 
enrollment and disenrollment. rather than waiting until the end of the 
month. 

The CMS will continue to work closely with Congress, GAO, beneficiary 
advocacy groups, and other interested parties to ensure that 
beneficiaries have complete and accurate information. 

Below is CMS' response on the draft report's recommendation as well as 
technical comments. 

GAO Recommendation: 

To ensure that beneficiaries are informed effectively of plan changes, 
GAO recommends CMS strengthen the agency's evaluation of the model ANOC-
EOC by reviewing alternative formats that include personalized drug 
coverage and cost information. 

We concur with the GAO's recommendation of the model ANOC-EOC and will 
consider reviewing alternative formats that include personalized drug 
coverage and cost information. We have undertaken several efforts to 
address some of the concerns, such as readability. effectiveness, and 
the length of documents. Over the past year, we have conducted a 
comprehensive examination of our informational materials, which 
included the ANOC and the EOC. As a result, we have incorporated plain 
language to assist in readability. In addition, the ANOC/EOC was 
restructured to ensure that important information was included at the 
beginning of the document to make is easier to use. Finally, by 
combining and standardizing the ANOC/EOC. the length of the documents 
was reduced and unnecessary information was eliminated. Recognizing 
that these documents communicate the most crucial and comprehensive 
benefit and plan information to beneficiaries, we have efforts underway 
to make additional changes for the 2010 plan year. 

For calendar year 2010. CMS has procured a contractor to ensure that 
annual beneficiary notification materials are being redesigned and 
standardized to provide better and more comprehensive information to 
beneficiaries. Specifically, this redesign has an overarching goal to 
provide information so that Medicare beneficiaries are confident and 
informed with regard to their health care options. In considering 
alternative formats that would include personalized drug coverage and 
cost information, we will do the following: 

* Develop and target the content of beneficiary notification materials 
at appropriate language and reading levels, and reduce the length of 
the existing models; 

* Conduct intensive beneficiary interviews to ensure these materials 
meet beneficiaries' information needs; 

* Ensure that materials include information for special populations 
such as dual-eligible beneficiaries; 

* Ensure that the materials conform to CMS' regulations and guidance; 
and; 

* Ensure that benefit information (for example, drug changes) are 
adequately explained. 

[End of section] 

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Kathleen King, (202) 512-7114 or kingk@gao.gov: 

Acknowledgments: 

In addition to the contact named above, Rosamond Katz, Assistant 
Director; Jennie Apter; Ramsey Asaly; Anne Hopewell; JoAnn Martinez- 
Shriver; Jessica Smith; and Hemi Tewarson made major contributions to 
this report. 

[End of section] 

Related GAO Products: 

Medicare Part D: Complaint Rates Are Declining, but Operational and 
Oversight Challenges Remain. [hyperlink, 
http://www.gao.gov/products/GAO-08-719]. Washington, D.C.: June 27, 
2008. 

Medicare Part D Low-Income Subsidy: SSA Continues to Approve 
Applicants, but Millions of Individuals Have Not Yet Applied. 
[hyperlink, http://www.gao.gov/products/GAO-08-812T]. Washington, D.C.: 
May 22, 2008. 

Medicare Part D: Plan Sponsors' Processing and CMS Monitoring of Drug 
Coverage Requests Could Be Improved. [hyperlink, 
http://www.gao.gov/products/GAO-08-47]. Washington, D.C.: January 22, 
2008. 

Medicare Part D Low-Income Subsidy: Additional Efforts Would Help 
Social Security Improve Outreach and Measure Program Effects. 
[hyperlink, http://www.gao.gov/products/GAO-07-555]. Washington, D.C.: 
May 31, 2007. 

Retiree Health Benefits: Majority of Sponsors Continued to Offer 
Prescription Drug Coverage and Chose the Retiree Drug Subsidy. 
[hyperlink, http://www.gao.gov/products/GAO-07-572]. Washington, D.C.: 
May 31, 2007. 

Medicare Part D: Challenges in Enrolling New Dual-Eligible 
Beneficiaries. [hyperlink, http://www.gao.gov/products/GAO-07-272]. 
Washington, D.C.: May 4, 2007. 

Medicare Part D: Prescription Drug Plan Sponsor Call Center Responses 
Were Prompt, but Not Consistently Accurate and Complete. [hyperlink, 
http://www.gao.gov/products/GAO-06-710]. Washington, D.C.: June 30, 
2006. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 108-173, § 101, 117 Stat. 2066, 2071-2152 (2003) 
(codified, as amended, at 42 U.S.C. §§ 1395w-101--1395w-152). 

[2] Part D drug coverage also may be provided through Medicare 
Advantage (MA) plans. MA plans are Medicare's private health plan 
option, providing coverage of benefits beyond prescription drugs. As of 
January 2008, about 8 million beneficiaries were enrolled in MA plans 
that provide drug coverage. 

[3] Some beneficiaries may change PDPs at other times throughout the 
year during special enrollment periods approved by CMS. For example, 
beneficiaries may enroll in a new plan if they move to areas not served 
by their plan. Beneficiaries who are eligible for both Medicare and 
Medicaid--a joint federal-state program that covers certain low-income 
individuals--known as full-benefit dual-eligibles may change drug plans 
throughout the year. Dual-eligible beneficiaries generally qualify for 
low-income subsidies that cover premiums and most of their out-of- 
pocket costs for Part D drugs. If CMS assigned a dual-eligible 
beneficiary to a PDP and that PDP, based on its bid for the ensuing 
year, would impose a premium on the beneficiary, CMS will reassign the 
beneficiary during the AEP to a different PDP in which the beneficiary 
will have no premium liability. In 2008, CMS reassigned about 2 million 
dual-eligible beneficiaries. 

[4] 42 U.S.C. §§ 1395w-21(e)(3), (f)(3), 1395w-101(b). 

[5] Each year, plan sponsors must submit bids, including any changes to 
formularies and plan benefit designs, to CMS. Sponsors must receive 
approval from CMS prior to implementing these changes for the next 
benefit year. 

[6] Required elements include how the monthly premium will change, how 
drug coverage and cost sharing will change, what to do if a drug the 
beneficiary uses will no longer be on the formulary or will have higher 
cost sharing, and how to change plans. 

[7] We excluded dual-eligible beneficiaries from our analysis because 
full-benefit dual-eligibles have the opportunity to change their Part D 
plans throughout the year. We also excluded beneficiaries enrolled in 
MA drug plans because, in addition to changes made during the AEP, 
these beneficiaries may change their plans once between January 1 and 
March 31 each year. In addition, we excluded beneficiaries enrolled in 
PDPs that are sponsored by employer or union groups. 

[8] Pub. L. No. 108-173, § 101, 117 Stat. 2066, 2075-2081 (2003) 
(codified, as amended, at 42 U.S.C. § 1395w-102). Sponsors may only 
offer plans with a supplemental prescription drug benefit, defined as 
when the total value of the coverage exceeds the standard prescription 
drug benefit, in areas where sponsors also offer plans with the 
standard prescription drug benefit. In 2008, the defined standard 
prescription drug benefit includes a $275 deductible, 25 percent 
coinsurance--the percentage of the costs that a beneficiary is 
responsible for--up to an initial benefit limit of $2,510 when the gap 
in coverage begins, and catastrophic coverage after $5,726.25 in total 
Part D drug costs. 

[9] Under federal law, formularies must include drugs within each 
therapeutic category and class of covered Part D drugs. CMS generally 
requires sponsors to cover at least two Part D drugs in each category 
and class, subject to approved exceptions or when there is only one 
drug in the particular category or class. According to CMS guidelines, 
for six designated drug categories, plan formularies must include "all 
or substantially all" drugs within these categories: antidepressants, 
antipsychotics, anticonvulsants, anticancer drugs, immunosuppressants, 
and HIV/AIDS drugs. 

[10] Formulary tiers are groups of drugs with different pricing levels. 
For example, a plan may have a tier for generic drugs that have the 
same active-ingredient formula as brand-name drugs, but usually cost 
less, and other tiers for higher-cost drugs. Tiers with higher cost- 
sharing include preferred brand-name drugs, which are deemed by the 
sponsor to be the first choice of drug provided; and nonpreferred 
drugs, which are covered by the plan but will cost the enrollee more 
than a preferred drug. Additionally, under CMS guidance, sponsors are 
permitted to set apart relatively expensive drugs on a specialty tier 
and charge more for these drugs than they typically do for preferred 
and nonpreferred drugs. 

[11] CMS approves Part D plans based on certain criteria including the 
offering of qualified prescription drug coverage and the sufficiency of 
actuarial determinations. CMS will not approve a bid if the agency 
determines that benefits offered--including the formulary and tiered 
formulary structure or utilization management restrictions--would be 
likely to substantially discourage enrollment by certain Part D 
beneficiaries. 

[12] For example, sponsors may only change the therapeutic categories 
and classes in a formulary at the beginning of each benefit year, 
except to account for new uses and drugs newly approved for coverage 
under the Part D program. In addition, sponsors may not remove Part D 
drugs from their formularies or change their cost-sharing tiers between 
November 15 and March 1 of each benefit year, unless the drug has been 
determined unsafe or has been removed from the market by the 
manufacturer. After March 1, sponsors may replace a brand-name drug 
with a generic drug, remove a drug from a formulary, or increase cost 
sharing for particular drugs only if the sponsor provides 60 days 
notice to all affected parties, including CMS, enrollees, physicians, 
and pharmacies and CMS approves the change. In these circumstances, the 
sponsor may not alter coverage of the drug for affected enrollees for 
the remainder of the plan year. 

[13] See Avalere Analysis Shows 16 Percent Increase for Enrollees in 
Top 10 Medicare Drug Plans, June 4, 2008, for weighted enrollment 
analysis of CMS enrollment data, available on Avalere Health Web site, 
http://www.avalerehealth.org/wm/show.php?c=1&id=781 accessed on August 
28, 2008. 

[14] J. Hoadley, E. Hargrave, et al, Medicare Prescription Drug Plans 
in 2008 and Key Changes Since 2006: Summary of Findings, The Henry J. 
Kaiser Family Foundation (Washington, D.C.: April 2008). 

[15] The Kaiser study analyzed data from CMS on a sample of 169 drugs 
selected to include the most commonly prescribed drugs and all 
alternative medications in some of the drug classes most commonly used 
by Medicare beneficiaries. The use of step therapy tripled from 4 
percent of the sample drugs in 2007 to 12 percent in 2008. 

[16] See C. A. Paulsen and C. Bransfield, Readability, Heuristic and 
Usability Evaluation of the Medicare Prescription Drug Plan Materials, 
American Institutes for Research (Concord, Mass: March 2006) and J. 
Hibbard, J. Greene, and M. Tusler, An Assessment of Beneficiary 
Knowledge of Medicare Coverage Options and the Prescription Drug 
Benefit (Washington, D.C.:May 2006). 

[17] M. Kutner, E. Greenberg, et al, The Health Literacy of America's 
Adults: Results from the 2003 National Assessment of Adult Literacy 
(September 2006). 

[18] GAO, Medicare: Communications to Beneficiaries on the Prescription 
Drug Benefit Could Be Improved, [hyperlink, 
http://www.gao.gov/products/GAO-06-654] (Washington, D.C.: May 3, 
2006). 

[19] Plain language (also called Plain English) is defined as 
communication the audience can understand the first time they read it. 
Material is considered to be written in plain language if the audience 
can find what they need, understand what they find, and use the 
information to meet their needs. 

[20] The Plain Language Action and Information Network is a group of 
federal employees that promotes the principles of plain language in 
government materials as a strategy for saving money and improving 
government efficiency. See [hyperlink, http://www.plainlanguage.gov]. 

[21] Federal Plain Language Guidelines: Improving Communications from 
the Federal Government to the Public, accessed from [hyperlink, 
http://www.www.plainlanguage.gov/howto/guidelines/reader-friendly.cfm] 
on October 22, 2008. 

[22] D. Shaller, Consumers in Health Care: The Burden of Choice, 
California HealthCare Foundation (Oakland, Calif: October 2005). 

[23] J. Hibbard, J. Greene, et al, An Assessment of Beneficiary 
Knowledge of Medicare Coverage Options and the Prescription Drug 
Benefit (Washington, D.C.: May 2006). 

[24] In its call letter to plan sponsors for benefit year 2008, CMS 
required sponsors to send an ANOC to enrollees by October 31, 2007. For 
AEP enrollment requests received prior to November 15 plan sponsors 
must submit all transactions to CMS on November 15 with an "application 
date" of November 15 of the current year, according to CMS guidance. 

[25] Under federal law, plan sponsors are required to disclose to 
Medicare beneficiaries certain information about the PDPs when they 
enroll and on at least an annual basis. This information must include a 
description of the plan's service area, benefits (including premiums 
and cost sharing), access, out-of-network coverage, formulary 
(including tiers and utilization management restrictions), plan 
grievance and appeals procedures, and quality assurance programs. Under 
regulations effective September 18, 2008, CMS is requiring plan 
sponsors to provide this information to enrollees at least 15 days 
prior to each year's AEP. 73 Fed. Reg. 54208, 54222 (Sept. 18, 2008). 

[26] In its call letter to plan sponsors for benefit year 2009, CMS 
requires plan sponsors to combine the ANOC and EOC in one mailing to 
enrollees for receipt by October 31, 2008. 

[27] An additional 57,000 ANOCs were received after the October 31 
deadline by beneficiaries in one employer-sponsored PDP. However, 
according to a CMS official, the agency does not consider these ANOCs 
late because the timeliness of ANOC delivery was out of the control of 
these sponsors and was dependent on negotiations with employer groups. 

[28] Such sentence lengths are inconsistent with established elements 
of effective communication such as clear language and short sentences 
ranging from 15 to 20 words. See Federal Plain Language Guidelines: 
Improving Communications from the Federal Government to the Public, 
accessed from [hyperlink, http://www.plainlanguage.gov] on August 13, 
2008. 

[29] The EOB mailing is a required monthly statement that shows a 
beneficiary's use of Part D drugs since the beginning of that benefit 
year. Sponsors are required to mail these statements to beneficiaries 
every month in which beneficiaries access their drug benefits. 

[30] For the 2008 AEP, sponsors had the option to mail a short Summary 
of Benefits (SB) with the ANOC for receipt by October 31, with the more 
detailed EOC to follow. For the 2009 AEP, CMS requires all sponsors to 
mail the ANOC and EOC together for receipt by October 31; the SB will 
be available to beneficiaries only upon request. 

[31] In addition to reviewing annual beneficiary notification 
materials, the contractor's responsibilities include an enrollment/ 
disenrollment analysis among Medicare Advantage (MA) plans, an analysis 
of how MA plans and benefit packages have changed over time from 2006- 
2012, and an analysis of enrollees with certain chronic diseases to 
evaluate cost-sharing scenarios and impacts for those in MA and fee- 
for-service arrangements. For the initial year of this contract, the 
agency estimates that the contractor will be reimbursed $894,088. 

[32] This estimation of the increased number of pages that must be sent 
to beneficiaries for the 2009 AEP is based on a comparison of the 
number of pages that one sponsor sent for the 2008 AEP (the ANOC, a 
formulary, and a SB) versus the documents that could be sent, as 
required for the 2009 AEP (the ANOC, a formulary, and the EOC). 

[33] Of 630,000 complaints filed over an 18-month period, most related 
to problems processing beneficiaries' enrollments and disenrollment 
requests. See GAO, Medicare Part D: Complaint Rates Are Declining, but 
Operational and Oversight Challenges Remain, [hyperlink, 
http://www.gao.gov/products/GAO-08-719] (Washington, D.C.: June 27, 
2008). 

[34] SSA is responsible for withholding Part D premiums from 
beneficiaries' monthly Social Security payments if they selected that 
payment method. State Medicaid offices determine which individuals are 
dually eligible for Medicare and Medicaid and eligible for help with 
paying for their premium and copayments. CMS also partners with various 
companies to manage different aspects of Part D. 

[35] CMS's April 2008 Transmission Overview lists 73 different data 
exchanges between CMS and MA and PDPs. 

[36] See GAO, Complaint Rates are Declining, but Operational and 
Oversight Challenges Remain, [hyperlink, 
http://www.gao.gov/products/GAO-08-719] (Washington, D.C.: June 27, 
2008). 

[37] Part D billing codes are used by pharmacies in order to identify a 
beneficiary's correct plan and benefit package and include four primary 
payer data elements known collectively as the 4RX data. 

[38] CMS sends weekly Transaction Reply Reports (TRR) to plan sponsors 
listing the status of all the transactions CMS processed for the plan 
that week. The TRR includes a final disposition code for each 
transaction. Once a sponsor receives an affirmative enrollment on the 
TRR report, it sends a confirmation letter to beneficiaries notifying 
them that their enrollment is complete. The monthly TRR aggregates the 
disposition of all transactions processed for a plan in the preceding 
month. 

[39] Sponsors submit an electronic file called a Batch Eligibility 
Query to CMS to verify members' Medicare eligibility prior to accepting 
an application for Part D. 

[40] If a beneficiary does not have documentation of his or her Part D 
enrollment, the beneficiary's pharmacist can submit an electronic 
request known as an E1 Query to CMS to verify the beneficiary's 
coverage and billing codes. 

[41] Of those beneficiaries whose AEP enrollments were completed after 
January 1, 2008, 85 percent had submitted their enrollment applications 
after December 15, 2007. 

[42] The remaining 3 percent of AEP enrollments were completed by June 
2008. GAO did not examine the specific reasons why these applications 
were delayed. 

[43] At the time of this study, CMS officials reported that the plan- 
to-plan reconciliation process in place during the 2008 AEP was not 
timely and that the agency was testing automated reconciliation 
software for use in 2009. 

[44] GAO has previously reported that in 2006 slightly more than a half 
million Medicare beneficiaries who chose to have their Medicare Part C 
& D premium deducted from their Social Security benefit experienced 
problems due, in part, to the limited processing window established by 
SSA and driven by Treasury's timetable. GAO also reported that the AEP 
does not end in time for all enrollment changes affecting premium 
withholding to be processed, resulting in a delay of several months 
before the correct premiums are withheld from a beneficiary's Social 
Security payment. See GAO, Schedule and Timing Issues Complicate 
Withholding Premiums for Medicare Parts C and D from Social Security 
Payments, [hyperlink, http://www.gao.gov/products/GAO-08-816R] 
(Washington, D.C.: July 15, 2008). 

[45] Medicare Part B typically covers outpatient health care expenses 
including physicians' fees. 

[End of section] 

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