Testimony
Statement by
Michael McMullan
Deputy Director, Centers for Medicare and Medicaid Services
on
Implementing the Medicare Prescription Drug Program
before the
Senate Committee on Governmental Affairs, Subcommittee on Oversight of Government Management, The Federal Workforce, and The District of Columbia
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April 8, 2004
Chairman Voinovich, Senator Durbin, distinguished members of the
Committee, thank you for inviting me here today to discuss
implementation of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), enacted into law on December 8,
2003. The Centers for Medicare & Medicaid Services (CMS)
is very proud to have a significant role in implementing this
historic legislation, which constitutes the most extensive
modifications to the Medicare program since its inception in
1965. CMS is working diligently to meet the numerous and
aggressive deadlines outlined in the MMA. CMS’ goal is
to implement all of the provisions of this legislation in a timely
manner and in such a way that the new benefits are as easily
understood and accessed by beneficiaries as quickly as
possible.
The MMA represents a fundamental change in the Medicare program by
offering our beneficiaries more choices in how they receive their
care and by establishing a responsive relationship with the
providers of that care. This will begin with the Medicare
sponsored drug discount card, and will continue as the full
prescription drug benefit is implemented in 2006, and represents a
lasting change in how CMS and the Medicare program will
operate. Whether it is in how we reduce Medicare overpayments
or how we improve quality of care, our fundamental goal is to offer
our beneficiaries choices of high quality health care, while being
more responsive and flexible in how we interact with the health
care providers who deliver the services.
CMS STRUCTURE
The CMS accomplishes its mission by working with, and through,
others. The Agency employs approximately 4,500 people in locations
around the country. However, these employees are only a small
portion of a large, complex network of people and groups that make
our programs work successfully. Some of the many others CMS
works with, and through, include:
- physicians, other health care professionals, providers, and health
plans;
- states, territories, and Tribes;
- CMS business partners, who process claims and carry out many of the
other administrative functions of CMS programs (e.g., contractors);
- health care groups and associations;
- beneficiary and consumer organizations;
- accrediting bodies;
- other Federal agencies; and
- researchers and others.
These business relationships leverage CMS’ resources and are
critical to achieving our goals and objectives. For example,
since 1965, we have entered into contracts with private companies
to administer various functions under the Medicare program.
Currently there are 34 companies that hold contracts to process
Medicare fee-for-service (FFS) claims. Several of these
companies process both Part A and Part B claims: thus 26
serve as fiscal intermediaries and 18 serve as carriers.
During FY 2003, we estimate that these claims processing
contractors provided claims processing services to about 33 million
beneficiaries; worked with approximately 1.1 million health care
providers; processed more than 1 billion Medicare claims; paid more
than $236 billion for beneficiary services; and handled more than
7.3 million review requests and other kinds of appeals.
The attached chart gives an idea of the scope of how many
individuals and organizations are partnered with CMS in carrying
out its mission.
MAJOR ELEMENTS OF MMA
CMS’ MMA implementation challenges can be categorized into a
number of broad categories including a prescription drug
discount card and transitional assistance program; the new
voluntary Medicare prescription drug benefit; modification of the
existing Medicare+Choice program, now renamed Medicare Advantage;
and contractor and regulatory reform. The MMA also modified
numerous payment systems under Medicare and Medicaid, particularly
those affecting rural providers; established new preventive
benefits; established a number of demonstration projects; provided
for administrative improvements and regulatory process changes; and
numerous other provisions. The new law contains substantial
and complex tasks for the Agency, the implementation of which
requires the concerted effort of thousands of Federal employees and
contractors. Given the nature of the work before the Agency
and the need for effective, steady leadership, we appreciate the
Senate’s swift confirmation of Dr. Mark McClellan as the new
CMS Administrator.
PAST SUCCESSES
Although new Medicare law creates major changes in the programs
administered by CMS, the Agency has dealt with change in the
past. Planning and prioritizing for implementation of the
Balanced Budget Act of 1997, the Balanced Budget Refinement Act of
1999 and the Medicare, Medicaid and State Children’s Health
Insurance Program Benefits Improvement and Protection Act of 2000,
have all been carried out within the past six years. CMS has
dealt with the challenges of Y2K and the destruction of our New
York contractor’s office on September 11, 2001. We have
recently implemented a series of quality measures for home health
agencies, nursing homes, and hospitals. These last
initiatives involved extensive consultation with industry;
development of quality measures; systems changes for collection of
data; and advertising campaigns to inform beneficiaries. In
short, CMS has experience with prioritizing and planning multiple
tasks similar to the work that will have to be done with MMA.
EARLY IMPLEMENTATION SUCCESS – THE DRUG CARD
As an example of what we have already done to implement MMA, on
December 15, 2003 just one week after the law was signed, CMS
published a regulation establishing a new prescription drug
discount card program. We solicited applications from
organizations interested in sponsoring such programs and on March
25, 2004 announced approved applications. On April 1, 2004
CMS announced the actual drug discount cards that the sponsors will
offer. Approved sponsoring organizations have provided CMS
with data on the enrollment fees they will charge and on April 29,
we expect to post on our website specific pricing data for the
drugs amd discounted prices available through these programs.
Beneficiaries will be able to sign up for the cards in May and
begin realizing the associated discounts on their drug purchases on
June 1, 2004. In addition, qualifying low-income
beneficiaries will receive a significant additional benefit of $600
annual credit applied toward their drug purchases.
Finally, a major educational campaign, using print and media
avenues, has been established to help our beneficiaries understand
how to access this new benefit. In particular, we worked with
the Social Security Administration to mail a separate letter to
Medicare beneficiaries with lower incomes, who are likely to be
eligible for the $600 annual credit.
Our consumer website, www.medicare.gov, will house a
critical new tool (“Price Compare”) for the drug card
initiative that will enable users to search for drug discount
cards; enter their specific prescription medication needs; and
compare the expected discounted prices that each of the cards might
offer.
We also organized a drug card conference held on April 7-8, 2004,
to educate and train those at the local levels. Congressional
staff were encouraged to attend. In addition, we are planning
other training days for Congressional staff. Going through
these processes will not only result in a viable drug discount card
program, but has helped CMS by preparing it for carrying out
similar tasks in implementing the drug benefit under Part D.
EARLY IMPLEMENTATION PROGRESS – OTHER PROGRAMS
Establishing the drug discount card program, although a major
effort, is not the only work that CMS has accomplished in the past
few months when it comes to MMA implementation. We have made
substantial progress on many provisions, including completing more
than a hundred distinct tasks. The attachment to my testimony
details the tasks that CMS has completed to date.
I would like to highlight the progress CMS has made over the last
five months. These efforts include:
-
updating the physician fee schedule to provide for a positive
1.5 percent increase in payments during 2004 and 2005, as
opposed to what would have been a decrease in payments;
-
revising payments for drugs currently paid using the average
wholesale price, and the accompanying fees for drug
administration. These changes in the approach to
reimbursement will protect the program from excessive
expenditures on drugs while simultaneously properly reimbursing
physicians, notably oncologists, for their work in delivering
these medications;
-
delineating hospital quality reporting requirements for a full
market-basket update, which in turn relies on previous work with
industry in establishing those quality measures, and previous
modifications of IT systems to collect the data;
-
making wage index reclassification adjustments to allow
qualifying hospitals to receive increased reimbursement;
-
increasing payments to rural providers;
-
updating payments to Medicare Advantage plans and approving plan
enhancements that provide additional benefits or reduced
cost-sharing for enrollees;
-
drafting, for publication this summer, proposed regulations for
Medicare Advantage and the prescription drug benefit;
-
steps toward adding a range of preventative services to the
Medicare benefits package, including a wellness visit,
cardiovascular screening, and diabetes screening;
-
progress toward changing our process of contracting with
carriers and fiscal intermediaries to incorporate more
performance measures and competitive processes;
-
setting up demonstrations and pilot projects as required by MMA;
and,
-
engaging in extensive beneficiary education, and reaching out to
our traditional and non-traditional stakeholders, including
physicians, hospitals, pharmacists and States, as well as PBMs,
employers and third party administrators.
It is obvious from this list of accomplishments that CMS is making
substantial progress in meeting the ambitious timelines within the
MMA.
IMPLEMENTATION PROCESSES
Effective dates for MMA provisions include several that are
retroactive, many that were effective upon enactment and some that
go as far out as October 2011. Implementation of these
provisions will require publication of numerous proposed and final
regulations, systems changes, letters to State Medicaid Directors,
educational efforts for providers and beneficiaries, and studies
and reports to Congress. CMS will have to hire sufficient
employees with appropriate expertise and experience, establish and
test major new IT systems, and work out contracting details with
outside entities that CMS relies on for implementation of large new
benefits. CMS must also work with States, SSA, and other
Federal entities, as we implement benefits that will need to be
coordinated with their existing programs. Finally, CMS must
communicate these changes to beneficiaries in as clear, and
effective a fashion as possible so that those who wish to take
advantage of the new, voluntary, benefits may do so.
The MMA makes up to $1 billion available to CMS through September
30, 2005 for start-up implementation costs. These funds will
be used on activities such as hiring additional personnel,
upgrading and adding new information systems, and educating
beneficiaries. CMS has already made important funding
decisions related to the implementation of the drug card and hiring
new employees. CMS continues to develop and implement the
budget plan as it moves toward implementation of the remaining
provisions.
Human Resources Issues
As noted above, CMS’ implementation of the MMA is well under
way, but significant work remains. The MMA adds provisions that
require new and additional expertise. Specifically, CMS will
need to hire individuals with expertise in pharmacy benefits
management, clinical personnel such as pharmacists and physicians,
individuals experienced with disease management and prevention, and
those who understand how employers structure their retiree benefit
packages. CMS will need additional IT professionals
experienced with the types of payment systems contemplated by the
law. Finally, CMS will need to hire individuals experienced
with government contracting, as much of the work under MMA, as with
most other Medicare programs, will be contracted out. We have
begun staffing a number of these new positions.
In addition to new government employees, CMS must contract with a
number of outside entities, including pharmacy benefit programs and
private health plans, in order to fulfill the mandates of
MMA. This work involves establishing parameters for those
contracts, issuing a solicitation, examining the resulting bids,
and awarding contracts to appropriately qualified
organizations. CMS employees overseeing the activities of
outside entities also must possess the expertise to ensure that the
prescription drug card sponsors and other contractors comply with
the medical privacy provisions of the Health Insurance Portability
and Accountability Act (HIPAA).
Program Integrity
The work of contractors must then be monitored and supervised to
ensure program integrity and effectiveness. The main
oversight work of CMS is to see that contractors and providers
implement these new programs as established by the Agency and
statute. CMS will need to monitor pricing of drugs and
benefits provided by drug discount card, drug benefit plans, and
Medicare Advantage plans, prior to implementation of MMA as well as
afterward. Error rates in payments will need to be
established and education made available to providers to help them
avoid common pitfalls as they show up. CMS is aware of
fraudulent activity involving individuals posing as Medicare
officials offering bogus drug discount cards. We have taken
steps to inform beneficiaries of this scheme and have worked with
OIG, the FBI and DOJ to prevent fraud in this and other programs
administered by CMS. When fraud or abuse occurs, the Agency
will address it as appropriate, either through remedial education
or punitive measures.
Systems Changes
New and revised payment systems require substantial IT changes
within CMS. The Agency will need to be able to process
beneficiary eligibility requests, enroll beneficiaries in new
benefits, and track utilization of services. In addition,
many of the changes made by MMA, particularly benefits being
provided on a demonstration basis, are accompanied by a requirement
that CMS study the effectiveness of the new programs. These
studies involve tracking clinical outcomes and quality
measures.
Revised and new IT systems will need to interact with those from
other federal agencies, such as the Social Security Administration
and the Internal Revenue Service, States, and the private insurers
who contract to administer new benefits under MMA, and those
offering established Medigap plans.
Beneficiary Education
CMS recognizes that opportunities for beneficiaries to choose new
benefits and how those benefits will be delivered may be somewhat
confusing. CMS, therefore, has a substantial educational task
to help beneficiaries take advantage of these new voluntary
programs. To address beneficiaries’ educational needs,
a major educational campaign has been established to help them
understand how to access new benefits under MMA. As you know,
the Congress gave us clear direction to educate and inform
beneficiaries about important new benefits in the MMA, particularly
the drug benefit and the drug discount card. The education
campaign uses a variety of means – print materials;
community-based outreach; television, print, and radio advertising;
the Internet; and, 1-800-MEDICARE – to reach
beneficiaries.
We launched a nationwide advertising campaign at the beginning of
February to alert beneficiaries to the new benefits that are
available under the MMA. Also, at the end of February, CMS
began mailing to all beneficiary households a fact sheet that
explains these new benefits. In the coming months, we will be
particularly focused on getting beneficiaries important information
about the drug discount card and transitional assistance
program. In early April, a detailed booklet about the drug
card was made available at medicare.gov or by calling
1-800-MEDICARE. At the end of April, a shorter publication on
the drug discount card will be mailed to every beneficiary
household. We anticipate using the website extensively to
educate beneficiaries concerning benefits that will be implemented
in the future.
The annual publication, “Medicare and You” covers
beneficiaries’ privacy rights under HIPAA with regard to
their interaction with CMS and its contractors. In addition,
entities offering the drug discount card and drug benefits are
considered health plans for purposes of HIPAA and will be required
to provide beneficiaries with a notice of their privacy
practices.
In addition, our 1-800-MEDICARE call center is in the process of
“ramping up” – training and adding new Customer
Service Representatives to answer calls about new benefits.
We expect to have about 1,400 representatives in six different call
centers in the United States trained and available by the end of
this month.
Even with all of these plans and tools, we understood early on that
our education efforts could not be successful without solid and
dependable community-based outreach. That is why we have also
invested in building alliances with other organizations that serve
Medicare consumers to help us in disseminating this
information.
Conclusion
The timelines required under MMA for implementing these important
new benefits are ambitious and will require prudent planning and
wise use of resources. We at CMS believe that we will be able
to meet the ambitious goals laid out in this new statute. I
thank you for your invitation to testify this morning and I welcome
any questions you may have.
Last Revised: April 8, 2004
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