CMS's Implementation and Oversight of the Medicare Prescription Drug Discount Card and Transitional Assistance Program

GAO-06-78R: Published: Oct 31, 2005. Publicly Released: Nov 30, 2005.

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Marjorie E. Kanof
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The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) added a prescription drug benefit to the Medicare program, to become effective January 1, 2006. To assist Medicare beneficiaries with their prescription drug costs until the new benefit becomes available, the MMA also required the establishment of a temporary program, the Medicare Prescription Drug Discount Card and Transitional Assistance Program, which began in June 2004. The drug card program is designed to offer Medicare beneficiaries access to discounts off the retail price of prescription drugs. All Medicare beneficiaries, except those receiving Medicaid drug coverage, are eligible to enroll in the drug card program. Certain low-income beneficiaries without other drug coverage qualify for an additional benefit, a transitional assistance (TA) subsidy, that can be applied toward the cost of drugs covered under the drug card program. The Centers for Medicare & Medicaid Services (CMS)--the agency within the Department of Health and Human Services that administers the Medicare and Medicaid programs--administers and oversees the drug card program. The drug cards themselves are offered and managed by private organizations, known as drug card sponsors. There are different types of drug cards. General drug cards are available to all eligible beneficiaries living in a card's service area; there are both national and regional general cards. Exclusive and special endorsement drug cards are available to specific beneficiary groups. Some drug card sponsors offer more than one drug card. Congress asked us to examine CMS's implementation and oversight of the temporary drug card program. Specifically, we reviewed (1) the processes that CMS used to solicit, evaluate, and approve drug card sponsors; and (2) the processes that CMS uses to oversee drug card sponsors and the problems identified as a result of CMS oversight.

The processes CMS used to solicit, evaluate, and approve general drug card applications were geared to the 6-month time frame between the enactment of the MMA and the mandated start date for the drug card program. This included the type of solicitation CMS used, the design of the application, and the application evaluation and approval process. CMS used a noncompetitive solicitation process in which all qualified organizations could participate in the program. CMS officials told us they took this approach to encourage participation in the program, facilitate communication with and among potential drug card sponsors, and avoid the need to develop weighted criteria to evaluate the applications--which CMS officials said would have been required if a competitive solicitation was used. CMS developed the application for drug card sponsors before all of the program's operational guidelines had been completed. As a result, CMS officials said that open-ended questions were used to learn more about and evaluate potential sponsors' capabilities and for other reasons. Based on its initial review of applicants, CMS approved only those that provided all of the information requested in the application. Initially denied applicants whose applications were missing minor information were allowed to provide the missing information through a redetermination process; those whose applications were missing significant information were allowed to appeal the denial through a reconsideration process. CMS announced its initial list of approved general drug card sponsors on March 25, 2004; that list did not include sponsors that had not completed the redetermination and reconsideration processes. The last sponsor was approved on May 7, 2004. CMS's oversight of drug card sponsors has identified and corrected some problems, but has had some limitations with respect to the timeliness of oversight activities and the guidance provided to sponsors. CMS uses multiple methods to monitor drug card sponsors. CMS investigates the complaints it receives directly from 1-800-MEDICARE and other sources, and collects information about the complaints reported to sponsors, known as "grievances." CMS has collected other data from drug card sponsors regularly, including drug price and pharmacy information that it published on its Price Compare Web site, as well as information on manufacturer and pharmacy price concessions. CMS also uses contractors to assist with oversight activities, including conducting financial audits of drug card sponsors and analyzing sponsor-reported price data. With respect to CMS's oversight, we reviewed five key program areas: drug prices, sponsors' pharmacy networks, sponsor-provided beneficiary information, TA, and beneficiary complaints and grievances.

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