S. HRG.

108727

HELPING THOSE WHO NEED IT MOST:

LOW-INCOME SENIORS AND THE NEW MEDICARE
LAW

HEARING
BEFORE THE

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION

WASHINGTON, DC

JULY 19, 2004

Serial No. 10840

Printed for the use of the Special Committee on Aging

(
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96738 PDF

2004

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SPECIAL COMMITTEE ON AGING

LARRY CRAIG, Idaho, Chairman
RICHARD SHELBY, Alabama
JOHN B. BREAUX, Louisiana, Ranking
SUSAN COLLINS, Maine
Member
MIKE ENZI, Wyoming
HARRY REID, Nevada
GORDON SMITH, Oregon
HERB KOHL, Wisconsin
JAMES M. TALENT, Missouri
JAMES M. JEFFORDS, Vermont
PETER G. FITZGERALD, Illinois
RUSSELL D. FEINGOLD, Wisconsin
ORRIN G. HATCH, Utah
RON WYDEN, Oregon
ELIZABETH DOLE, North Carolina
BLANCHE L. LINCOLN, Arkansas
TED STEVENS, Alaska
EVAN BAYH, Indiana
RICK SANTORUM, Pennsylvania
THOMAS R. CARPER, Delaware
DEBBIE STABENOW, Michigan
LUPE WISSEL, Staff Director
MICHELLE EASTON, Ranking Member Staff Director

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CONTENTS
Page

Opening Statement of Senator Larry E. Craig .....................................................

Opening Statement of Senator John Breaux .........................................................

1
2

PANEL I
Mark McClellan, M.D., Ph.D., administrator, Centers for Medicare and Medicaid Services ........................................................................................................

PANEL II
Gail Wilensky, Ph.D., John M. Olin senior fellow, Project Hope, former administrator, Health Care Financing Administration, Bethesda, MD ..............
Byron Thames, M.D., trustee, American Association of Retired Persons, Orlando, FL ...............................................................................................................
Jane Delgado, Ph.D., M.S., president and CEO, The National Alliance for
Hispanic Health; founding member, The Access to Benefits Coalition, Washington, DC .............................................................................................................
Patricia B. Nemore, attorney, Center for Medicare Advocacy, Inc., Washington, DC .............................................................................................................

44
59
71
91

APPENDIX
Material submitted by Laura Summer and Lee Thompson, Center on an
Aging Society, Georgetown University Health Policy Institute .......................

121

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HELPING THOSE WHO NEED IT MOST: LOWINCOME SENIORS AND THE NEW MEDICARE
LAW
MONDAY, JULY 19, 2004

U.S. SENATE,
SPECIAL COMMITTEE ON AGING,
Washington, DC.
The committee met, pursuant to notice, at 2 p.m., in room SD
628, Dirksen Senate Office Building, Hon. Larry E. Craig (chairman of the committee) presiding.
Present: Senators Craig, Breaux and Stabenow.
OPENING STATEMENT OF SENATOR LARRY E. CRAIG,
CHAIRMAN

The CHAIRMAN. Good afternoon, everyone, and welcome to the

Senate Special Committee on Aging. The new Medicare law enacted last fall represents the most substantial expansion and improvement in the program since its creation 39 years ago. Not surprisingly, debate about this new law was and remains quite spirited. However, there is one aspect of the new program about which
few should disagree. It is this: the new Medicare law offers dramatic new assistance, billions of dollars of it, for seniors of modest
and low income.
Those seniors who are struggling the hardest to pay for their prescriptions are precisely the seniors whom this bill targets most generously and that is as it should be.
We are here today to explore the specifics of what this legislation
will mean for seniors in greatest economic need. Our discussion
will begin with an updated look at how the new prescription drug
card is doing and in particular ways in which CMS and its partners are working to bring the low income $600 transitional assistance to as many seniors as possible.
On this front, we will hear encouraging news from CMS Administrator Mark McClellanMark, welcome to the committeewho
we are pleased to have with us today. I understand, for example,
that seniors are now signing up for the cards at a rate of 25,000
per day. Yes, that is right. Twenty-five thousand per day and also
that the drug price savings continues to be impressive.
CMS meanwhile continues to aggressively expand its outreach
and enrollment efforts including improvement in the Price Compare web site and also through grant assistance to communitybased organizations and to national coalitions. One of these, the
Access to Benefits Coalition, will also be providing testimony today.
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Even more importantly, we will also hear testimony about the
new laws full drug benefit schedule to begin in 2006, and the ways
in which low-income seniors stand to benefit tremendously under
the new assistance that is now just 17 months away.
Nearly half the new laws funding is targeted especially to lowincome seniors and more than one in three seniors will qualify for
assistance. For the vast majority of these seniors, this will mean
zero premiums, zero deductibles and no gaps in coverage and
copays of just a few dollars per prescription.
It is difficult to imagine a stronger package. It is not to say this
will be easy. This is a tremendously complex program, and it is
being implemented on a very ambitious time table.
Our witnesses today will offer guidance on such critical questions
as how we can tailor our outreach efforts more effectively. Reaching
as many qualified beneficiaries as possible should be a top goal.
When debate over adding prescription drug benefits began several years ago, the guiding motivation was first and foremost to
help those seniors who were struggling to make ends meet, to those
seniors who were sometimes forced to choose between food and prescriptions. For those seniors in the greatest need, this new law is
truly a godsend.
We have a remarkably accomplished panel of witnesses today,
but before I turn to our panel, let me turn to my ranking colleague
and partner here, Senator John Breaux of the great state of Louisiana.
STATEMENT OF SENATOR JOHN BREAUX

Senator BREAUX. Thank you very much, Mr. Chairman, and

thank all of our witnesses who will be presenting testimony in
what is an incredibly important subject for all of our nations seniors. The Medicare legislation that Congress passed arguably was
the most important change in Medicare since 1965 when we passed
Medicare. It was very significant.
People do not run to Canada for hospitalization. They do not seek
off on bus trips to Canada to see doctors in Canada. Why? Because
Medicare covers both hospital visits and Medicare covers doctor visits. When Medicare is completely fully implemented in the drug
program, the necessity of seniors to go to Mexico or to Canada or
to an internet to order drugs from who knows where will cease to
exist because for the first time in the history of the program seniors will have an adequate guarantee of drugs available to them
and their families at a price that is affordable just as Medicare covers adequately the cost of hospitalization and the cost of doctor visits.
Getting from where we are today to where we want to be is not
an easy task. Neither was it an easy task to implement Medicare
back in 1965 when we created a national insurance program that
covers hospitalization or later when the program was expanded to
cover doctors as well.
You do not do these things overnight. That is why the first part
of the journey toward complete insurance coverage for pharmaceuticals was a stopoff, if you will, with a Medicare drug discount
card. I said at the time we were working on the program that the
thing that I feared the most was that we would give seniors too

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3
many choices. I am a big believer in people, particularly in the
health care field, of having choices to choose the program or the
plan, the hospital, the doctor, that is best for them.
I said at that time it would be very confusing for a senior to walk
into the local drugstore and pull out his wallet or her purse and
have 10 or 12, 15 different discount cards trying to figure out
which one is best for them.
Truth is now there are over 70 discount cards. There are not 15;
there are 70 to pick and choose from. So in the beginning of this
program, it is not going to be easy, but the assistance that is offered is certainly worth the effort to try and ensure that you are,
in fact, picking the best card for your needs. Or children who are
helping their parents or grandchildren who are helping their parents or senior citizen centers and various parts of the country that
are helping the senior pick the best card for them.
Mr. McClellan and Medicare, to their credit, as I understand it
now, there is a program where you can sort of dial in, give a list
of the drugs that you are on, and the computer system will kick
back to you which is one of the better cards for you to utilize.
So this is a monumental and historic accomplishment. No accomplishments of that size and scope can be done without a few bumps
in the road. So I am glad, Mr. Chairman, we are having a hearing
today to see where those bumps are, how we are going to smooth
them out, until we get to that point in time where prescription
drugs are treated from an insurance standpoint just like hospitals
and doctors are today. Thank you.
The CHAIRMAN. John, thank you very much for that fine statement, and now we will search for the bumps in the road because
I think your analysis of it is very apropos.
Our first witness today is Dr. Mark McClellan, the new Administrator for the Centers for Medicare and Medicaid. As we all know,
Dr. McClellan has what may well be the hardest job in Washington
these days: overseeing implementation of the vast and complex new
Medicare law. But if anyone is up to the task, I suspect you are,
Mark. A former Commissioner of the Food and Drug Administration, Senior White House Health Advisor, professor and medical
doctor, Dr. McClellan brings to this job an unprecedented array of
experience. So we welcome you before the committee and are anxious to receive your testimony.
Please proceed, Mark.
STATEMENT OF MARK MCCLELLAN, M.D., PH.D., ADMINISTRATOR, CENTERS FOR MEDICARE AND MEDICAID SERVICES, WASHINGTON, DC

Dr. MCCLELLAN. Mr. Chairman, Senator Breaux, thank you for

having me here this afternoon to discuss the new Medicare prescription drug benefit and thank you for your leadership in working
together to bring overdue comprehensive drug coverage to the millions of low-income Medicare beneficiaries who too often have to
struggle with paying for the cost of their drugs, on the one hand,
and paying for their other basic necessities on the other.
While Medicare beneficiaries can get relief from high drug prices
and high costs, the comprehensive help available for low-income
beneficiaries is especially important, as you all noted. We deeply

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appreciate the strong and constructive interest from so many people involved in policymaking and advocacy from so many perspectives in helping us implement the new law.
The new prescription drug relief for beneficiaries of limited
means is critically important to get out as soon as possible, and we
look forward to further public discussion and comment after we
publish our proposed rules on the drug benefit to help make sure
we are providing these comprehensive benefits as effectively as possible to the most vulnerable seniors and people with disabilities
and Medicare.
While we are working to implement the new prescription drug
benefit, we are also using the authority that Congress gave us to
provide relief right now to beneficiaries who do not have good drug
coverage through the Medicare prescription drug discount card. I
am pleased to say that in a little over a month, as you mentioned,
Mr. Chairman, approximately four million people have signed up
for the program enrolling at a rate of about 25,000 every business
day.
This includes close to a million lower income beneficiaries who
are receiving the $600 credit in transitional assistance and some
additional discounts. These beneficiaries are all receiving substantial savings on the drugs they need with prices for brand name
drugs about 11 to 18 percent lower than what Americans pay on
average even with the discounts they get from private insurance
and Medicaid programs and they are getting much larger savings
on mail order and generic drugs.
We are also pleased that seven major drug manufacturers are
now offering large wraparound discounts for the low-income beneficiaries who use up their $600 credit.
The many brand name drugs with wraparounds include six of
the top ten in terms of beneficiary spendings: Zocor, Lipitor,
Celebrex, Fosamax, Norvasc and Vioxx. Generally, these prescriptions will cost at most $5 to $15, even after the $600 credit has
been used. So this amounts to literally thousands of dollars of lowincome assistance with drug costs available right now this year and
again next year before the full drug benefit starts.
In addition, the Office of Management and Budget has provided
guidance to all Federal agencies that transitional assistance available to low-income beneficiaries does not affect eligibility or benefits for any other Federal program.
Since the drug card program started just 6 months after the
Medicare law was enacted, we continue to take steps to improve it,
including new steps to make it easy to start getting real savings
quickly on line at Medicare.gov and to make sure that when you
call us at 1800MEDICARE anytime 24/7, you can quickly reach
a trained customer service representative to get the personalized
help you need and then find out about how to get real savings from
the drug card, generally all done in well under 20 minutes.
We have also started some unprecedented collaborations with
state health insurance assistance programs and private advocacy
groups such as the groups making up the Access to Benefits Coalition to educate beneficiaries about this important new help. This
is all leading up, as you mentioned, Mr. Chairman, to the comprehensive benefits that will be available to low-income bene-

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ficiaries who enroll in the new Medicare prescription drug program
beginning in 2006.
Although this voluntary benefit will be available to all of Medicares 41 million beneficiaries, Congress specifically provided very
generous help to those who need it the most, those with limited
means or catastrophic costs.
Of those beneficiaries expected to enroll in the drug benefit,
three groups of low-income beneficiaries will receive premium and
cost-sharing subsidies such that their drug costs will range from almost nothing to only a few hundred dollars depending on the type
of assistance for which they qualify.
The first group of approximately 6.4 million full benefit dual-eligible individuals will pay no premium or deductible and only have
$1 to $3 copays for each prescription.
The second group, an estimated three million individuals with incomes lower than about $12,600 for an individual and $16,900 for
a couple who meet the assets test, will pay no premium or deductible and only a $2 to $5 copayment for each prescription.
The third group of approximately 1.5 million Medicare beneficiaries with incomes of about $14,000 for an individual and
$18,700 for a couple who meet the asset test will pay premiums
based on a sliding scale, a $50 annual deductible and a 15-percent
copayment on each prescription.
Institutionalized persons who are full benefit dual-eligibles are
exempt from this cost sharing completely. When dual-eligible beneficiaries move from the Medicaid system to the new Medicare benefit, millions will no longer be subject to restrictions that many
states have had to impose to limit costs but that may also limit
quality of care such as restrictions on the number of prescriptions
that can be filled each month or very strict formulary requirements.
So that is better, more comprehensive coverage for millions of
Medicare beneficiaries and new comprehensive coverage for millions more with limited means. All together about a third of beneficiaries and almost half of minority beneficiaries can get the security of paying only a few dollars for the prescription drugs that
they need.
We are moving ahead to use the new law to bring overdue relief
to Medicare beneficiaries who are now struggling with the cost of
prescription drugs. We look forward to continuing to work closely
with you to provide more and more effective relief. Thank you for
your time and Im happy to answer any questions that you all may
have.
[The prepared statement of Dr. McClellan follows:]

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30
The CHAIRMAN. Mark, thank you very much for that testimony
and opening comments. During debate on this bill, I think the biggest focus was on those seniors who did not otherwise have drug
coverage and who just could not afford it themselves. Does the new
low-income assistance in the 2006 benefit meet that need?
Dr. MCCLELLAN. It does. As I mentioned before, there are over
six million dual eligible beneficiaries who will be able to get access
to a comprehensive benefit that must cover all classes of drugs,
very broad formulary, very important and national and universal
appeals rights, plus millions more who have limited means but who
are not able to enroll in state programs now because the states
have not been able to provide coverage for them.
So all together it is about a third of Medicare beneficiaries, as
you said, who are going to have access to a comprehensive benefit
as part of this overall Medicare legislation.
The CHAIRMAN. In that category, most of the qualifying low-income seniors in 2006 will pay, so we now understand, zero premium, zero deductible and a few dollars per prescription. How does
that compare to the kind of drug coverage the average non-senior
is likely to find out in the private marketplace today? Is there a
comparison?
Dr. MCCLELLAN. Yes, very favorably. The drug coverage available to many people with limited means today has significant copayments. Usually the copays are lower for generic drugs than for
brand name drugs, and the Medicare benefit has that same structure. But this is a more comprehensive benefit for people with limited means and these millions of beneficiaries do not have access
to this kind of coverage in the private markets today and that is
why it is so important to bring it into Medicare right now.
The CHAIRMAN. Mark, weeks prior to the ability to enroll and
then following that, there was a considerable amount of criticism
as it relates to seniors just were not signing up. The figure I used
in my opening comments and you have used it of 25,000 now signing up per day, when I first saw that figure I thought they must
be thinking about 2,500. So talk to us about that. Has enrollment
accelerated recently? What are the reasons for this?
Dr. MCCLELLAN. Well, it is definitely continuing at a steady clip.
We went back and looked at previous experience when the Federal
Government tried to implement other major new benefit programs
that offer very affordable coverage and help people with their
health care costs substantially. In general, it takes some time. For
example, in the CHIP program, the Childrens Health Insurance
Program, which now provides coverage to many millions of lower
income children and their families, that program took more than
a year to reach the million enrollees mark because of issues with
states working with the Federal Government to set up access to the
program and important issues about education and outreach, letting people know that these benefits are there and helping them
through the decision process so they could sign up, so they could
decide this was a really good deal for them and sign up for it.
So it took a little time, but enrollment picked up, and these kinds
of barriers to enrollment are present anytime a new Federal program starts, and we are working harder than ever to overcome
them. So in this case, we tried to look back on that experience and

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learn from it. In addition to the steps that we are taking through
our 800 number, through advertising, through mailings to beneficiaries, through mailings from the Social Security Administration,
we form new partnerships with state health insurance assistance
programs and recently we have been getting partnerships underway with many private organizations that are very good at doing
outreach and education for low-income beneficiaries.
I think this is a win-win effort for us. It helps get people informed and enrolled in the Medicare prescription drug benefit program. It also is a good foundation for the education and outreach
that we intend to do as part of the comprehensive low-income drug
benefit that is coming next year. We have got a little bit more time
to do that, but we want to take full advantage of all of that time.
So with new partnerships, with proven effective approaches to
doing outreach, I think the numbers are picking up, but you know
no program works unless it delivers real benefits, and this program
is delivering real savings when it comes to the prices that beneficiaries who get the drug card can pay when they go to their local
pharmacy, and it is especially delivering benefits in terms of literally thousands of dollars in help this year and next year for the
low-income beneficiaries who do not have drug coverage today.
That is the ultimate thing that is driving the significant enrollment in this program, and that is why we are so pleased to have
so many partners on the outside in this unprecedented effort to get
millions of people signed up faster than ever for a new Federal benefit program.
The CHAIRMAN. Back in March, CMS testified before this committee that you anticipated savings from the cards of between I
think 10 to 15 percent on total spending and with about 25 percent
on individual drugs. Your testimony today suggests that actual savings are in many cases proving better and that especially is true
of I believe generics.
Dr. MCCLELLAN. Yes.
The CHAIRMAN. What are the reasons why the savings seem to
be even better than expected and do you expect price savings to
continue to go down as the program stabilizes?
Dr. MCCLELLAN. Well, we are seeing significant new savings I
think for two main reasons. One is that seniors are able to band
together now more effectively and stick together long enough to get
negotiated discounts on prices from drug manufacturers.
So seniors are very good comparison shoppers now and many of
them have been able to find through a pharmacy discount card or
something like that some small sources of discounts at their local
pharmacies. Well, this does better. It adds to that by getting them
those negotiated discounts which are being passed on from the
drug manufacturers.
The other very important step is making the price information
available. Now not every senior goes and looks at every piece of
price information on the 60,000 drug products at the more than
50,000 pharmacies around the country, but the fact that that information is out there has created a new ability to comparison shop
for drugs much like people in the past have done for many other
products and services, their groceries, their vacations, their mortgages, you name it. We have seen over the past 2 months with this

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program that prices available come down, come down, especially for
cards that were initially higher priced, but across the board, we
have seen reductions, not increases in drug prices, prices for brand
name drugs, over the first couple of months that our price comparison has been active. So it is a new way of comparison shopping
coupled with a new ability for people to band together and get the
big discounts.
The CHAIRMAN. Great. That is good news. Let me turn to my colleague, Senator Breaux. John.
Senator BREAUX. Thank you, Mr. Chairman, and thank you, Dr.
McClellan, for your testimony. We had authorized in the Medicare
bill automatic enrolling for low-income Medicare beneficiaries, and
you all were considering that approach. Can you bring us up to
date on what you all have decided on on automatic enrollment?
Dr. MCCLELLAN. Yeah, I sure can. Auto enrollment can be a good
way of getting the enrollment numbers up quickly. It means that
we do not have to do the retail process of going door to door, which
we are doing right now with a lot of these outside organizations to
get the numbers, to get people informed and get those who can
benefit to enroll.
We started an auto enrollment process with states that have
pharmacy assistance plans and those auto enrollments have already resulted in more than 100,000 beneficiaries getting into this
program and qualifying for the low-income assistance in a very
straightforward way.
We are also talking with states about using the same kinds of
auto enrollment tools for other populations. Under the statute,
however, states are allowed to do auto enrollment when they have
got so-called authorized representative status for beneficiaries.
That means they can act on behalf of the beneficiary for decisions
like choosing to enroll in this program.
It turns out that most states do not have the legislative authority
to do that now, so we are working with those states on finding
other ways to overcome any barriers to information, barriers to enrollment. A number of states, for example, have sent out pre-filled
out applications that just require a beneficiarys signature and that
has led to tens of thousands of more people signing up as well.
But we are looking for every avenue that we can take under the
statute to get people informed and enrolled in this program. I
should add, too, that when it comes to the full drug benefit in 2006,
there is an automatic enrollment authority that applies to all Medicaid beneficiaries, the full dual-eligibles as well as those in the QL
and SLMB and QMB programs, too, that we are going to be asking
for comment on how we can use that as effectively as possible when
it comes to the full benefit in 2006.
Senator BREAUX. So there is still apparently a large number of
people who are eligible for the $600 person discount that are not
taking advantage?
Dr. MCCLELLAN. They are not yet enrolled. That is right. We are
up to close to a million enrolled in that program, but we aim to get
a lot higher than that, and that is why we are really focusing new
efforts on working with states and working with these outside advocacy organizations that are very well connected to these beneficiary groups.

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Senator BREAUX. Do you have an idea of how many that are eligible for the discount, a full discount, that are not getting it simply
because they have not enrolled?
Dr. MCCLELLAN. Well, the projections were that about 7.3 million
people would take advantage of the card program between now and
when it ends at the end of 2005 and a little bit over 4 million people out of that 7 million would be eligible for the low-income assistance as well. So we are definitely still trying to get those numbers
up and to do it faster than other previous new Federal benefit programs have achieved in the past.
Senator BREAUX. About 25 percent ball park figure?
Dr. MCCLELLAN. Right now in the first month, and I intend to
keep doing all we can to really increase that number.
Senator BREAUX. Well, I would really urge you to do it. I mean
this is the easiest thing to take advantage of that you can possibly
imagine.
Dr. MCCLELLAN. Yes.
Senator BREAUX. Here is $1,200 a year for prescription drugs for
a couple that is lower-income that is there just for signing up, and
they really need
Dr. MCCLELLAN. Right.
Senator BREAUX [continuing.] The maximum amount of encouragement to sign up for it because the program is three.
Dr. MCCLELLAN. That is right.
Senator BREAUX. It is available. Tell me a little bit about the
interaction between the Medicare discount card? How is working
when you have the various companies coming in with their own
discount card? Back to my example in the beginning of the little
couple that comes to their local pharmacy with 10, 12 different discount cards available to them. I mean tell me a little bit about how
is it working with the interaction between the company discount
cards and the Medicare card itself?
Dr. MCCLELLAN. Well, there are two ways that that can work.
There are now more than 100 manufacturer programs out there
that have their own cards, that have their own enrollment process.
Senator BREAUX. These are the manufacturers?
Dr. MCCLELLAN. These are manufacturer programs of one kind
or another, and one of the things that we do to try to make it easier for people to find out about enrolling in those programs is give
them the information they need to connect with those programs
when they call us up at 1800MEDICARE, so when you call us,
you hear not only about the drug card and the transitional assistance that we offer but also about state programs and manufacturer
programs that can help out as well.
What I think is really important though is the fact that many of
the major drug manufacturers, seven so far, are now offering wraparound discounts on any card that meets some basic terms, basically just passing on the full value of the manufacturer discounts,
and those prices for drugs even after you use up your $600 are now
$5 to $15 for a drug that can retail price for more than $100. This
includes drugs from Lilly, like Lipitor, drugs from Merck like Zocor,
many other commonly used drugs. As I said, 6 out of the top 10
spending drugs for beneficiaries now and when you call us up or
go to our web site, we will tell you about all of these specific drugs,

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the prices that you can get for them after you use your full $600
credit and all the cards that are offering this wraparound help. So
as you said, it is literally thousands of dollars in new help right
now that people can qualify for and they should be finding out
about it and we want to get that help to them as quickly as possible.
Senator BREAUX. My last question, Mr. Chairman, is again when
I made some opening comments, I talked about the fact that a person who is confused or not knowledgeable, if you will, about how
this process works, if they call the 1800MEDICARE and can they
give someone a list of the drugs that they happen to be taking, four
or five, and their prescriptions and say here is what I am taking,
can you tell me which card best would fit the needs that I have to
meet each month?
Dr. MCCLELLAN. That is exactly right. The easiest way to get
connected to the help you need is to call us up and be ready with
just a few pieces of informationyour zip code, your income level
if you think you may qualify for any of these kinds of assistance
programs, and the drugs that you are on and the dosages that you
can get usually from your pill bottles. We have recently made some
improvements in the web site which are also being used by the customer service reps at our 1800 number to make it even easier to
enter all the drug information, and no matter how obscure the prescription is, whether it is an oral medicine, or otherwise, so that
can be as straightforward as possible.
Senator BREAUX. Give them that and what do you get back from
Medicare?
Dr. MCCLELLAN. You can get back several things. We can either
tell you right then and there which cards look like they are going
to be a great deal for you and what you would end up paying under
those cards for your drugs so you can compare that to what you
are paying now and make an informed decision about whether this
is a good program for you. Or a lot of people like to see something
in writing, so we will send them out a personalized brochure that
is the Medicare drug card program for that specific beneficiary that
gives them information on the top programs for their needs, and
they can customize it to be just about one or two or three card programs. They can focus in on the pharmacies that they care most
about or they can get a lot more information if they want.
We have also listened to concerns that you and others have expressed about not having too many choices, not having too much
information to sort through, so now when you go to our web site
or call us up at 1800MEDICARE, we focus in first on the top five
choices. So it is like a special five-card program just for you, but
it is honed in on the five best choices for your needs. You do not
have to look at any of the other programs at all.
Senator BREAUX. Thank you, Dr. McClellan.
The CHAIRMAN. John, thank you. We have been joined by our colleague on the committee, Senator Stabenow. If you wish to make
any opening comments and questions of Dr. McClellan, please proceed.
Senator STABENOW. Thank you, Mr. Chairman, and I apologize
for not being here in time to hear your testimony, and I may, in

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fact, be a little redundant, but I appreciate your time, Mr. Chairman.
The CHAIRMAN. That is OK.
Senator STABENOW. This is an extremely important subject and
so I appreciate the fact that you are holding this and with my colleague as well, Senator Breaux.
First, I would say Mr. McClellan, would you agree that this is
a pretty complicated process for seniors to wade through?
Dr. MCCLELLAN. Senator Stabenow, it is good to see you again,
and we are, as we have just been discussing, trying to take all the
steps that we can to make it as straightforward as possible. It does
not have to be complicated. Seniors who call us can now generally
get the information they need in well under 20 minutes to find out
not just about which cards can help them save a lot of money, but
how much they can save and what it exactly takes to start getting
those savings. So we do not want it to be complicated. We want to
do everything we can.
We have tried to learn from comments, suggestions and so forth
to make it as straightforward as possible to start getting help right
now.
Senator STABENOW. Well, of course, the best way to make it the
least complicated would be to have one card and for Medicare to
be able to negotiate a group discount to get the maximum discount
possible, as the VA does. That is not what this law does. Instead
we have multiple cards, and on the cards for a moment, would you
not agree that it is a concern, I am wondering how you are going
to handle when people sign up for an individual card based on the
medicine that they need and with the help of your agency work
through which card gives them the best coverage maybe for five
medicines that they are on, but then what happens when they find
out that the discount list can change every 7 days or the price can
go up every 7 days?
Do you have a plan for how you are going to address or have you
already had calls from people who are locked into a card for a year
and find that the five medicines that were covered are now maybe
only three medicines that are covered?
Dr. MCCLELLAN. Senator, it is very important to us that the benefits that beneficiaries expect to get under this program actually do
come through. That is why we have been monitoring closely what
has been happening to prices, what has been happening to drugs
covered and monitoring closely all calls and complaints that we get
and handling them promptly.
On prices, it has been the case in this program from the beginning that they can only go up when costs go up, not for any reason,
which is the case outside of Medicare today, and we have seen
prices for brand name drugs actually come down on average since
this program was started and we are going to continue to monitor
that closely.
In terms of drugs that are covered, we have had virtually no
complaints. I do not know of any complaints about a particular
drug that was listed as being on a formulary, not being there for
a discount, and, in fact, in monitoring what the card sponsors have
been doing over time, we have seen no cases, no significant cases,
of drugs that were listed coming off.

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In talking with the card sponsors, many of them are saying that,
well, you know, the only times that we think we might even think
about changing some of the drugs that we cover are if a generic
version is approved, in which case seniors get a lot more savings
for it, or if the FDA changes the reasons that it thinks the drug
should be used, in which case there would be a good medical reason
for a change, but we are monitoring that closely and so far we have
not seen any substantial complaints about either prices, because
they have been coming down or drugs covered because they have
been staying stable under this program.
Senator STABENOW. Well, I think that is good news if, in fact, the
drugs do not change once a senior signs up. Would you not agree
that that would not be a very fair situation if somebody signed up
for a card based on certain medicines being discounted and then
found that that changed down the road? Would you not agree that
that would not be, at a minimum it would not be fair, even though
right now it may be legal under this?
Dr. MCCLELLAN. That is right. That is why we made clear to the
companies that we will be monitoring them for any kind of bait and
switch activities and tracking customer complaints, which we are
doing now, and we are also making sure that customers know
about it, the cards that are doing the job of keeping prices down
and offering a broad range of prescriptions, so that those cards are
the ones that attract beneficiaries. That is why it is so important
I think to get good information out about actual prices that people
are paying and actual drugs that are being covered, so that people
do not just have a discount card or they do not know what it
means. That is the way that too many of the existing discount
cards have operated before this program came along.
Senator STABENOW. You speak about the prices having gone
down since the program was instituted. Have you monitored or
looked at the studiesAARP has done a study, Families USA and
othersabout the dramatic increases in prices before the discount
cards came into being?
Dr. MCCLELLAN. They are looking at a slightly different thing.
They have been tracking before and during the list prices for brand
name medicines. Seniors should never be paying anything close to
the list price for brand name medicines with the programs out
there thanks to us and thanks to other options that are available
to them as well.
We have looked at prices for brand name, commonly used brand
name drugs going back as far as early 2003 and comparing to the
discounts that we are seeing now, and again, we are seeing savings
of 10 to 30 percent for commonly used brand name drugs even compared to the list prices, the list retail prices from way back before
this program started in early 2003. But that is why I think it is
so important for seniors to get into a card program like this, that
they never have to pay anything close to retail prices again.
Senator STABENOW. Well, this reminds me a little bitsome of
the price increases I have seen reminds me a little bit, Mr. Chairman, of a store who ups their prices 30 percent and then puts a
sign out and says 15 percent off. There is a lot of concern about
that kind of thing happening since between the time the law was
passed and the discount cards.

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But a couple of other questions, if I might, Mr. Chairman?
The CHAIRMAN. Surely.
Senator STABENOW. Regarding the assets test, we, and again I
apologize if you spoke to this, and I did not hear your comments
earlier.
Dr. MCCLELLAN. No, go right ahead.
Senator STABENOW. But when we look at the fact that for $6,000
for a low-income senior, they can be removed from what is really
the maximum help. I mean we all agree that under this legislation,
while I would certainly design the entire bill differently, do it differently, we I think all agree that for low-income seniors, there is
the maximum amount of help, and we would want that to be for
low-income seniors.
I have to say as a caveat that it very much disturbs me in a state
like Michigan where someone under Medicaid is going to go on to
Medicare and actually pay a bigger copay than they did under
Medicaid. But could you speak to the fact that right now we are
looking at a calculation for a low-income senior and an assets test
that basically says if you have $2,000, if you exceed $2,000 on
household goods or personal effects, and that could be your wedding ring, that could be your furniture, if you exceed $1,500 on a
life insurance policy, which my guess would be most people today
if you have life insurance, it would be more than that, or funds set
aside for burial expenses that would exceed $1,500, you disqualify
as a low-income senior for the help, so that you have, maybe you
have a small insurance policy, put aside a little bit so your children
do not have to pay for your burial, you have a wedding ring, maybe
you have a little bit of furniture, and this program does not help
you? Does that make sense?
Dr. MCCLELLAN. That would not make sense, and that is why I
want to make sure we implement the asset test effectively. You
know the point of this legislation, as you said, was among other
things to target the best, the most comprehensive assistance, to the
people that have the least ability to pay. While there are many seniors that have some ability to pay because they have got a lot of
financial assets and other resources available, there are millions
who do not, and that is why under our estimates, I think this is
going to definitely be borne out in practice. A third of all Medicare
beneficiaries are going to qualify for this comprehensive low-income
help.
Now we have got some work to do to make sure that we implement this asset test effectively, but I can tell you right now, even
before we go through the full notice and comment and have discussions about what should count and what should not count, I am not
going to be taking away benefits based on seniors keeping their
wedding rings. That is not the way that this program I think was
intended to operate and that is not the way it is going to operate.
There may well be some other financial assets. You know if they
have got tens of thousands of dollars in the bank, yeah, I think
that that isin an era when we are worried about not spending
too much money in Federal Government programsthat might not
be the best person to target all this comprehensive assistance to.
But we are going to be very careful about doing this asset test
in a way that is fair, in a way that focuses on seniors true ability

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to pay, not because they have got a family heirloom or a wedding
ring or some other special prized asset that should not be counting
for purposes of these important benefits.
Senator STABENOW. Well, you may make light of that, but the
law does not say that. That is not what the law says.
Dr. MCCLELLAN. Well, that is why it is very important for us to
implement the law effectively. We have some discretion within the
law on how we interpret things like what counts for an asset and
what I think and what we will ask for comment about is that Congress intended for us to do a reasonable application of an asset test
for people that are not truly of limited means just because they
happen to have low-income in a particular year. They might be expected to contribute to some of the costs, you know, 25 percent of
the costs of the premium just like higher-income beneficiaries
would. But for beneficiaries who are truly low income but for a
small life insurance policy or a wedding ring or something like
that, that is who we really want to help.
Senator STABENOW. But the law refers to categories and calculations regarding funeral plots and life insurance policies, and by definition, let us say someone gets to keep their wedding ringthank
goodness. You are saying and the law says that if you have $6,000
worth of assets, you do not qualify as a low-income senior. That is
not very much; is it?
Dr. MCCLELLAN. It is not very much, but it is much more, Senator, than millions of beneficiaries have today, millions of beneficiaries who are paying full cost for their drugs and who do not
have any help right now from Medicare or anybody else with their
drug costs, and that is what we are trying to change.
Senator STABENOW. You are suggesting that when you are done,
a third of those on Medicare will qualify under your definition of
someone who has $6,000 or assets or less?
Dr. MCCLELLAN. About a third of Medicare beneficiaries can get
the additional assistance envisioned in this law, being able to get
your drugs for as little as a few dollars for prescription or at most
a few hundred dollars a year; that is right.
Senator STABENOW. Well, we will be watching very closely on
that, Mr. McClellan.
Dr. MCCLELLAN. I will look forward to working with you on this.
I know how important that assistance for people with limited
means is to you. We are going to have a broad discussion of this
when we put out our proposed regulations. We are working with
the Social Security Administration, other experts, on thinking
about what should and should not be counted in terms of coming
up with a workable fair asset test and we are going to do that as
effectively as we can under this law.
Senator STABENOW. Well, just for the record, Mr. Chairman, I do
not believe there is a way to come up with a $6,000 assets test that
is really fair, no matter how good intentions are, how many good
intentions there are. That amount is an extremely limited amount
of money to say to seniors of this country in terms of giving them
the help that they need.
One other quick question. That is last week we read in the paper
about another group of people I am very concerned about, and that
is those who have private retiree coverage now. There are a lot of

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those folks in my state who worked their whole life, have retiree
coverage, have given up pay raises and given up other kinds of bonuses to be able to get health care during their retirement years.
Originally we saw numbers before this bill passed that about 2.7
million people were likely to use retiree coverage because of the
way this is structured, and now we are hearing at least internally
that there are numbers that say that that is more like 3.8 million
people who will lose retiree coverage.
This is just one of a series of reasons why I did not support the
original Medicare bill because I believe in addition to not really giving the help to low-income seniors because of all the bureaucracy
and the assets test and so on, I have a very deep concern and belief
that the first rule should be do no harm.
That if anybody is losing their retiree coverage as a result of this,
we are doing them harm. I am wondering if you would respond?
I understand you had put out a statement saying
Dr. MCCLELLAN. I did.
Senator STABENOW [continuing.] Saying that those numbers were
not accurate.
Dr. MCCLELLAN. That is right.
Senator STABENOW. It is difficult for us when we look at the
budget numbers that were put out that were not accurate, and
then different numbers come out after the bill passed, and we hear
from the actuary that he was threatened with losing his job. So it
is very difficult, and I certainly want to have confidence in the
numbers that come out, but it is very difficult given the kinds of
information and changing of numbers and so on that have gone on
as it relates to this new law, but I wanted to give you an opportunity to speak to why this number evidently put together by someone within the department which is substantially higher, in fact 1.1
million more retirees that would lose private coverage, why you are
indicating that that is not accurate?
Dr. MCCLELLAN. Yeah. Senator Stabenow, let me reiterate very
clearly that that that is not our policy and that what we are doing
as a lead up to implementing this new retiree assistance effectively
is considering a range of options, and we are going to put out for
public comment a range of options about how best to increase the
strength and the security of retiree benefits. I have talked to a lot
of those seniors as wellI probably do not get as much of a chance
to in Michigan as you doand I know how worried they are about
their benefits. They have seen the trends over the last decade of
declines in coverage and less employer contributions and higher
costs that they have to pay, if they get to continue their benefits
at all. We intend to stop that.
We intend to stop that decline. We intend to end up with a policy
that not only preserves but increases the support for retiree coverage, that adds existing employer contributions to the new help
from Medicare, over $70 billion in new assistance, for employer
programs like GM, Ford and others in your state, and we are going
to have a very public process.
We are getting comment on this from Members of Congress like
you, we are getting comment from retiree organizations, we are
getting comments from the employers themselves about how we
can use all the tools in this bill to get them the maximum addi-

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tional help in continuing to provide strong effective retiree coverage. It includes coverage that people get through the retiree drug
subsidy which is what was the particular subject of that New York
Times article.
It also includes new assistance that retirees can get by employers
wrapping around the Medicare Part D benefit or offering an enhanced Part D benefit themselves, one that is a comprehensive
benefit and that they will now be able to do for a much lower cost,
than if they are footing the whole bill on their own.
So all of those approaches are important ways of augmenting employer coverage, and we are going to have a full discussion of all
the options for doing this with a single goal in mind of how do we
get the most additional help to retirees for the least additional cost
to the Federal Government.
Senator STABENOW. Well, I am certainly hopeful that your statement that no one losing their private coverage as a result of this
will, in fact, happen. Finally, are you going to support our re-importation bill?
Dr. MCCLELLAN. Well, that is outside of my current jurisdiction,
Senator. I am sure that we are going to keep working together as
close as we can on finding all the safe and proven and effective
ways of lowering drug costs for our seniors and I look forward to
continuing to work with you on all of these ideas.
Senator STABENOW. Thank you. Thank you, Mr. Chairman, for
your patience.
The CHAIRMAN. Thank you, Senator.
Senator Breaux.
Senator BREAUX. I just have two follow-up points. I mean the
fact about employer retirees losing their retiree coverage as a result of this bill, they were losing it way before anybody even
thought about this.
Dr. MCCLELLAN. They are losing coverage now. That is what we
are trying to stop.
Senator BREAUX. My own father had his own dramatically reduced, and his company told all of their future retirees they would
have zero coverage long before we even started thinking about this
idea.
Dr. MCCLELLAN. Yeah.
Senator BREAUX. Another point is the means test was not dreamt
up in this Medicare bill. I mean we have means test for Social Security. We have means test for Medicaid. In fact, is it not true that
the Medicaid means test is substantially more restrictive to be eligible for a full ticket for prescription drugs under Medicaid? The
assets test is $2,000 for an individual, $3,000 for a couple, and it
is not indexed?
Dr. MCCLELLAN. That is right.
Senator BREAUX. This is $6,000 of an individual for a full ride,
$9,000 for a couple, and in addition to that, is it not indexed as
well?
Dr. MCCLELLAN. That is right. As you said, the Medicaid tests
are stricter in very many states. The Medicare act means test is
based on an SSI test so its very similar, same kind of indexing and
so forth.

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Senator BREAUX. So I mean is it not clear that the means test
that we used in this Medicare bill for prescription drugs, in fact,
is substantially more generous than the existing Medicaid means
test and the SSI means test?
Dr. MCCLELLAN. As is the coverage that will be provided under
this bill for millions of Medicaid beneficiaries who currently face restrictive formularies and other limits on the numbers of prescriptions they can fill.
Senator BREAUX. I mean there was some argument for, I would
say, Mr. Chairman, for no means test. But when you have a limited
amount of money, which is $400 billion, we could have had no
means test if we could have gotten, you know, $600 billion. I got
people complaining now because somebody scored it at 800 billion.
I mean we could have spent a trillion dollars and covered everybody who is over 65 with free drugs, but we do not have the money
to do it.
The CHAIRMAN. Thank you for those questions. Let me ask one
that deals, and I am pleased that we have looked at that assets
test. I will submit for the record the conference agreement and how
it applies. It doubled the SSI test and it excluded specifically certain items like the house, like the car for transportation, up to
$2,000 worth of household goods. It does exclude the wedding ring
and life insurance up to $1,500, and so I think there is a substantial increase in the general generous character of the test.
Mark, both with respect to the drug card going on right now and
with respect to the 2006 benefit, lower income seniors are often the
most challenging to reach and you have talked about a variety of
scenarios and groups you are involving. Answer this for us if you
would, please. What are the reasons for this difficulty and what
outreach strategies are best for reaching the low-income seniors
and is your outreach effort being tailored for both rural populations
and for specific minority populations?
Dr. MCCLELLAN. It absolutely is. Just picking up on your point,
I think that looking back over the history of programs, well-intentioned programs intended to help people with limited means who
are really struggling to get by. Outreach, I think, is one of the most
critical barriers and problems that often does not get the attention
it deserves. That is why there have been previous Federal programs that can take many years to get up to even 50 percent of
eligible enrollment. We are going to do better than that this time,
and we are also going to take steps to increase enrollment in those
other Federal programs by taking many unprecedented outreach
steps.
This includes steps that we have tried already and that have
been proven to be effective, steps like mailings from the Social Security Administration and Medicare that are targeted with some
simple facts that people can use to figure out how to start taking
advantage of the new benefits, advertising, especially advertising
targeted in communities that have a high preponderance of these
lower income beneficiaries can help as well. Broadcast advertising
in particular and not just English language. We are doing Spanish
language and other advertising now as well.
Working with private groups. Around the country, many of these
individuals have connections in one way or another in their com-

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munity, connections to faith-based organizations, connections to
seniors organizations, connections to other types of ethnic organizations. All of those sources can be great opportunities for outreach
and connection.
For example, we have been working with the National Alliance
for Hispanic Health, and they have just come up with a new instruction manual in Spanish on how to use the Medicare approved
drug discount card and how to get thousands of dollars worth of
additional assistance beyond the discounts available for low-income
beneficiaries.
We cannot do this by ourselves, but because they have a tremendous amount of experience and connections with community groups
that reach and deal with low-income beneficiaries on an on-going
basis, we can talk to and connect with a lot more people. That is
the philosophy behind the new grants that we are awarding. We
just announced $4.6 million for community-based organizations recently. That is the philosophy behind doubling our support for the
state health insurance assistance plans, and also doing new grant
programs for the Administration on Aging, the Indian Health Service, and other Federal agencies that also have good connections and
good experience in outreach.
All together, I think these efforts will not only help us boost enrollment from the people who can get the most out of these new
programs for the drug benefit but will also end up increasing enrollment in many of these other Federal programs that for too often
have fallen short of the maximum benefits that they can provide.
So this is a huge outreach effort. We are looking at all of the approaches that can be proven effective. We are even working some
with the USDA and some of their local agricultural offices which
is a good connection point for people in rural communities.
We are going to keep that up and redouble our efforts over the
coming year for both the drug card transitional assistance which
people can get and use right now and for the full drug benefit in
2006.
The CHAIRMAN. Senator, yes.
Senator STABENOW. Thank you, Mr. Chairman. I just have to
comment more than a question and say I appreciate and fully believe that you are doing maximum outreach as it relates to all of
this, but we would not need to spend all this money to do this and
all this time if we had taken the approach of one Medicare card,
allowing Medicare to negotiate maximum discounts for everyone,
and then making that available to people so that this approach is
the most complicated and the most costly way to go on this.
I would also say if we allowed the pharmacist in my great state
and around the country to negotiate and bring in prescription
drugs, to do business with those in Canada, we could drop prices
in half tomorrow, which is a bigger discount than any card we are
going to come up with.
Dr. MCCLELLAN. I know how strongly you feel about these issues,
and I would just like to add on this point that by having multiple
cards available, we can make sure that people get the formularies
they want. It is true that there are some government programs out
there that just have one set of benefits, but I am not sure that is
going to deal effectively with all of our diverse beneficiaries. The

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VA formulary, for example, that gets mentioned a lot does not
cover drugs like Vioxx and Lipitor and many of the other drugs
that are commonly used by many millions of seniors. So what we
are trying to do with our improvements in the card program is
make it possible for you to hone right in on just the one or two or
three programs that are best for your particular needs.
So it is like having just one or a few choices, but they are choices
that are actually going to match up with the kind of drug assistance that you get, and in terms of prices, this negotiation approach
seems to be making a real difference. There was a Consumers
Union study recently that found that the prices available through
the Medicare endorsed drug cards are lower than the prices in
California for Medi-Cal drugs and, you know, Medi-Cal is a very
big state government run program that negotiates lower prices for
their beneficiaries. The Medicare cards are doing better than that
program. So there are certainly more steps that we should think
about doing, but I think there is a lot of help available right now
that we need to connect up with seniors, and we will keep trying
to make the program work even better.
The CHAIRMAN. Mark, thank you very much. As Senator
Stabenow said, and as John and I certainly also agree, we are
going to keep a very close eye on you.
Dr. MCCLELLAN. Well, thank you very much. I think this kind
of dialog is extremely helpful for us in focusing our efforts effectively, and we definitely appreciate your support for getting real relief right now to people who have already been waiting too long
with high drug prices. Thank you very much.
The CHAIRMAN. Well, we know that you have a very difficult task
in front of you with a very complicated bill, and we will always expect you to be on time and on schedule.
Dr. MCCLELLAN. I will do my best.
The CHAIRMAN. Thank you very much.
Dr. MCCLELLAN. Thank you.
The CHAIRMAN. Now let us ask our second panel to come forward, please. Thank you all very much. Our second panel today we
will hear from Gail Wilensky, a former administrator of the Health
Care Finance Administration. That is the old HCFA versus the
new CMS. Currently the John M. Olin Senior Fellow at Project
Hope, where she is one of the countrys foremost authorities on
Medicare, Medicaid and health care policy.
Next, we will hear from Dr. Byron Thames.
Dr. THAMES. Thames.
The CHAIRMAN. Thames. A family physician from Orlando, Florida, joining us today as a trustee of AARP, an organization, of
course, whose support and counsel was critical to the enactment of
the Medicare legislation we are discussing today.
Next will be Dr. Jane Delgado.
Ms. DELGADO. Yes.
The CHAIRMAN. Is president and CEO of the National Alliance
for Hispanic Health and also a founding member of the new Access
to Benefits Coalition that Dr. McClellan talked about, an organization dedicated to promoting outreach and enrollment of low-income
seniors in the new Medicare drug program.

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Last, today Patricia Nemore, an attorney and Medicare expert,
who is with the Washington Office for the Center of Medicare Advocacy, an organization focused on improving access to Medicare
and quality health care. Well, we thank you all very much and,
Gail, we will start with you.
STATEMENT OF GAIL WILENSKY, PH.D., JOHN M. OLIN SENIOR
FELLOW, PROJECT HOPE, FORMER ADMINISTRATOR,
HEALTH CARE FINANCING ADMINISTRATION, BETHESDA,
MD

Ms. WILENSKY. Thank you. Mr. Chairman, Senator Breaux,

thank you for inviting me to testify. I would like to re-enforce some
of what has been said about how the new Medicare legislation will
help the lowest income and the most vulnerable populations. I also
want to stress the importance of allowing the full benefit to be implemented before introducing new legislative changes.
As it is, it will take a Herculean effort to implement the major
provisions of the legislation as it is now specified in law. I know.
I have been there and I can now say it in a way that Mark McClellan cannot. The Medicare prescription drug card began enrolling
beneficiaries in early May and started operations June 1, as you
know.
CMS estimates that about four million have enrolled, a really remarkable number given that it is only 2 months out. The card provides a way to get immediate assistance, especially for those who
have no outpatient coverage which, of course, is not the majority
of seniors, but even more important is the cash assistance that has
been provided for those who are below 135 percent of the poverty
line, the $600 that they will have as well as no enrollment fee.
CMS has found that low-income beneficiaries are saving substantial amounts of moneyyou have been hearing that already from
Dr. McClellanwhen you think about both the discount and the
cash assistance. There is some very important provisions of the
cash assistance which I hope will be considered as precedent for future policy changes.
The first is that the entire $600 is available even though the program started June 1, but more importantly is the provision to be
able to roll over unused dollars into next year. I keep hoping that
the Congress will consider that for the provisions and flexible
spending accounts rather than the current use it or lose it provision which only encourages employees to spend their money however they may at the end of the year.
Cards and assistance that can be used by these low-income seniors are people who will also have access to state pharma programs
or some of the special discounts that the manufacturers make
available so that their help may even be greater than it now appears.
The real benefit, of course, though, starts in January 2006. A lot
of attention has been given to the gap in coverage, the so-called
donut hole. Although, as you well know, the fact is that 14 million low-income seniors will not have to face that gap in coverage
provided that they also have low assets. People who are below the
poverty line pay only a small copay up to the catastrophic coverage.
Those who are institutionalized dual-eligibles pay nothing at all.

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People who are above 135 percent of the poverty line but below 150
pay slightly higher copayments, but relatively small amounts.
Now, a lot of attention has been raised recently about what has
been happening with the dual eligibles, those individuals who are
eligible for Medicare and Medicaid. Of course they will not be impacted until January 2006, but there is something that is very
ironic that is going on with some of the discussion.
Before the legislation was passed, many individuals spoke as
though they wanted to have Medicare supersede Medicaid because
Medicare has not been typically regarded as a means tested or welfare-related program. Now, it is possible that there are some people
with very severe disabilities who happen to live in very generous
states that could find themselves somewhat worse off, but, in fact,
the states will save money, not as much as they would have if
there hadnt been the maintenance of effort provisions, but they
will nonetheless save money. So it is hopeful that in the generous
states, they will continue providing some extra coverage, but the
fact is under the old dual-eligible Medicaid coverage of prescription
drugs, because prescription drugs is an optional benefit, there was
no guarantee as to what individuals would be covered for.
This was not an entitlement. Many states had preferred drug
lists, do have preferred drug lists under Medicaid and a number of
states have a lot of restrictions in terms of the amount of drug coverage provided. None of that will now happen with the dual eligible. So that while there may be some issues for some of the most
disabled individuals, I think that we ought to understand that dual
eligibles in general will be much better off than they had been before.
There is some important information in a recently released study
that I see was outside the door by PriceWaterhouseCoopers that
shows the substantial amount of help that will be going to people
below 150 percent of the poverty line and below 135 percent of the
poverty line. They estimate that 98 percent of the spending by dual
eligibles will be covered by this new bill. They furthermore estimate that 65 percent of the low-income beneficiaries are expected
to pay less than $250.
Just a couple of comments about some lessons that we are already learning. The fact of the matter is reaching low-income populations has always been very difficult. We know that from the
qualified Medicare beneficiary outreach attempts at QMB, the socalled SLMB, the selected low-income beneficiaries, from the Childrens Health Insurance Program, and that this is not a new problem with regard to the prescription program attached to Medicare.
The cash transition program will help. It will give CMS some
time to figure out how to reach out to these low-income populations. As was discussed, automatic enrollment has been requested
by some states and that this and other strategies will also be helpful in identifying low-income populations. Outreach is important.
The state aging agencies can be helpful. The churches, the advocacy groups are all very important to be involved.
The presidents budget assumes 10.9 million people out of 14.5
eligible will actually enroll in 2006. That is an extraordinary number. I do not know whether they will be able to reach it, but the

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fact that that is their expectation really is a very important focus
point. They will need lots of help.
Let me again end with my plea, do not fix problems legislatively
before 2006 when the main benefit has been rolled out unless you
do not care if the program starts on time.
There will, of course, be clean-up legislation. There always is. We
saw the Balanced Budget Refinement Act and the so-called Beneficiary Improvement Act following the Balanced Budget Act. CMS
now has an enormous burden put on it. A new benefit using a new
delivery system, a modified private health care plan, lots of
changes to Part B drug coverage, lots of provider payment changes,
and other areas not even related to Medicare.
Congress has really helped by providing a billion dollars to CMS
and $500 million to the Social Security system, something that I
believe is unprecedented. It has been helpful that Mark McClellan
was confirmed as quickly as he was, but there has been a lot of
staff turnover and an enormous amount of work. Some of it was
predictable because of the aging of the staff, but even so, when it
happens, it is still very difficult.
This means that if there is an attempt to try to change the legislation before January 2006, it is very unlikely that this important
benefit will actually exist. Let it go as it is. There will be problems.
Fix them legislatively, but after the fact if you care about what
happens to these low-income seniors.
Thank you.
[The prepared statement of Ms. Wilensky follows:]

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59
The CHAIRMAN. Gail, thank you very much. Now, Dr. Thames.
Dr. THAMES. Thames, yes sir.
The CHAIRMAN. Thames. Thank you very much.
STATEMENT OF BYRON THAMES, M.D., TRUSTEE, AMERICAN
ASSOCIATION OF RETIRED PERSONS, ORLANDO, FL

Dr. THAMES. Thank you very much, Mr. Chairman, Senator

Breaux. We thank you for inviting AARP to discuss the new Medicare drug law and how it helps beneficiaries with limited incomes.
These provisions offer meaningful assistance to over 13 million people who need help the most in purchasing prescription drugs. They
are among the most important features of this new law, and are
the first critical steps toward providing comprehensive and affordable prescription drug coverage that all Medicare beneficiaries need
and deserve.
AARP is working to ensure that beneficiaries know about the
new benefits and take advantage of the assistance. We are conducting extensive public outreach efforts that to date have reached
roughly 300,000 of our members and their families. We have produced three booklets explaining the new law in plain language that
the average reader can understand.
AARP is also among the more than 80 groups participating in
the Access to Benefits Coalition which is working to find and help
those eligible for the extra assistance to understand and enroll in
the programs. To meet this challenge, the Coalition is providing
grants, education materials and technical assistance to coalitions of
local groups that are forming across the country to help people take
advantage of the assistance available to them.
The rollout of the new limited income benefits is a massive undertaking and as with many new programs, lessons are learned
along the way. Medicare officials are already taking advantage of
these lessons to make improvements, such as establishing a standard application form that can be used to enroll individuals in any
of the more than 70 different discount card options and allowing
state pharmacy assistance programs to auto enroll their members
in the drug card program.
AARP believes we can and should make further improvements as
we proceed. For example, people in Medicare savings programs also
should be auto enrolled in the drug card program. These beneficiaries generally have incomes below 135 percent of the Federal
poverty level and are among those who most need help with prescription drugs. Relying on outreach efforts alone virtually guarantees that many of these people will not get the $600 transitional
assistance credit to which they are entitled.
Auto enrollment is a proven method to ensure that they do gain
access and we believe it can be done in a way that preserves choice
and encourages market forces to help drive prices down. For the
comprehensive drug program, the most important needed improvement to the low-income provision is elimination of the asset test.
The asset test creates a welfare stigma and sends the wrong message because it penalizes individuals who have managed to modestly save for retirement. The asset test also involves complicated
rules and massive amounts of documentation which may well dissuade people from applying for extra assistance.

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One of Medicares greatest strengths is that it does not carry
such a stigma. Medicare is a social insurance program. An asset
test for the drug benefits begins to erode that great strength. With
these and other improvements that can be made, the extra assistance provided for people with limited incomes in the new Medicare
drug law establishes a foundation and model for providing comprehensive drug coverage to all Medicare beneficiaries.
That is a goal that we all share. We greatly appreciate the efforts
of the administration and Congress to reach out to those who are
eligible for this extra assistance and to make refinements as the
program is implemented.
We look forward to continuing these efforts through full implementation of the new law in 2006 and beyond. Thank you.
[The prepared statement of Dr. Thames follows:]

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71
The CHAIRMAN. Doctor, thank you very much. Now, let us turn
to Dr. Jane Delgado.
Doctor.
STATEMENT OF JANE DELGADO, PH.D., M.S., PRESIDENT AND
CEO, THE NATIONAL ALLIANCE FOR HISPANIC HEALTH,
FOUNDING MEMBER, THE ACCESS TO BENEFITS COALITION,
WASHINGTON, DC

Ms. DELGADO. Good afternoon, Mr. Chairman, Senator Breaux. I

am president and CEO of the National Alliance for Hispanic
Health, founded in 1973, and today serving over 12 million persons.
I am also a founding organizational member and on the five-person
steering committee of the ABC Coalition. My summary statement
is going to focus on four things: the importance of MMA to Hispanics; the ABC Coalition; what we are doing at the Alliance; and
also some early feedback from communities which is helpful as we
move forward.
First of all the importance of MMA to Hispanics. Most people do
not know this, but Hispanics live longer than non-Hispanic whites.
This is true for both Hispanic men and Hispanic women. So anything that has to do with older adults, we are keenly concerned
with.
We are very concerned about individualized care. Our recent report Genes, Culture and Medicines points out the differences
among people in how they metabolize drugs. So individualized care,
which is the wave of the future, with reference to pharmaceutical
drugs is very important for us.
The positive impact of MMA on healthy aging especially for lowincome seniors. This is important to us as Hispanics.
Now, the ABC Coalition. Many people have mentioned it and I
would like to say that our goal is very simple: to enroll 5.5 million
beneficiaries by the end of 2005. Our members are very diverse. We
are a group of senior organizations, disability organizations, faithbased, minority, provider, consumer and advocacy organizations,
and we grow weekly.
Now, our membership is over 82. ABC as an organization is
about effective implementation of the new Medicare law to ensure
that low-income beneficiaries make optimal use of available public
and private benefits to pay for prescription drugs.
I also want to say what ABC is not about. We are not about
whether the MMA should or should not have been passed. We are
not about how to reform it or whether we should. We are not about
who should be elected president or to Congress. We are not about
what we should do in other legislative positions. This is an organization people have agreed to be part of to enroll low-income seniors.
Our steering committee is the National Council on Aging, Alzheimers, ourselves, AARP and Easter Seals, and we work through
our working groups.
What we have successfully done has been based on the collective
experience of all our members. One is to give grants to local organizations so they can actually enroll people. But the second thing is
to give web-based tools to people so once they are at the point of
trying to enroll people, they have the best information.

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We have heard, that low-income people do not have access to the
web. We understand that. But the people who are providing the
intermediary service of helping enroll people do. So we have webbased tools that can help people get the best information on what
is happening with MMA and the prescription drug benefit.
When we look at what we are doing at the Alliance, we are doing
what we know best. We have established networks and funded 25
community-based organizations to actually enroll people, and in
that we have to do some creative thingsgive people laptops, give
them money so they could buy laptops so they could actually be
part of the enrollment. We have produced videos. We have written
and published a bilingual workbook. We have included the information on the Medicare transitional program on our help line.
From the early feedback we get from communities is accurate
and timely information is needed. People talk about confusion, but
when there are more choices, and choice is a good thing, there is
going to be some confusion. So we need to make sure that trusted
providers of information are there to help people work through the
process.
This is an opportunity not just for the program, but also to talk
to people about health. The outreach workers can go out, talk to
people, do the kind of work which we want them to do, plus part
of it is the MMA prescription benefit.
We find that there is a continuing importance of being able to go
to your local pharmacy. People have a relationship with that person. They need to continue that.
The wraparound benefits are very important. If I were going to
say what were the key things that are important about MMA, first
of all, it is the single-most important opportunity to help lower income beneficiaries in the last 40 years. We think this is a key event
for us. We want to make sure to support everything that we can
to do it.
Second, the low-income benefit will help even more people in
2005 and further in 2006. We are glad about this, but we also know
in order to do this that Medicare really needs to have the legislative language so they can have the full authority to work directly
with community-based organizations.
Finally, we understand how very often a national campaign with
counting the number of impressions in television and listening to
radio is very important but, as we know, from every program in
health education, knowledge is not enough. You need knowledge,
attitudes, and behaviors. These community-based partners who are
out there at the front lines are key to making this program a success.
That is what ABC is about. That is what the Alliance is doing.
That is what makes this important, and we are here to work with
you to make sure that the new prescription and preventative care
benefits ensure a population that has healthy aging.
Thank you.
[The prepared statement of Ms. Delgado follows:]

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91
The CHAIRMAN. Jane, thank you very much. Now let me get to
the last of our panelists on panel two, Patricia Nemore.
Patricia, welcome.
STATEMENT OF PATRICIA B. NEMORE, ATTORNEY, CENTER
FOR MEDICARE ADVOCACY, INC., WASHINGTON, DC

Ms. NEMORE. Thank you, Senator Craig and Senator Breaux.

Since I understood that the interest of the committee is largely in
the implementation of the Medicare drug plan, the testimony that
I have submitted for the record as well as my oral comments today
focus on those areas where we at the Center for Medicare Advocacy
believe the Secretary and the Administrator can act to improve the
drug benefit. We have not addressed the many areas of the law
that we believe do need to be improved, amended or repealed.
We know that low-income Medicare beneficiaries have disproportionately complex health care needs and that their enrollment in
assistance programs is hindered by a lack of information and by
complicated and burdensome application and enrollment processes.
The prescription drug program and the low-income subsidy are,
as each of you have said today, and everyone who has testified before you, extremely complex and are likely to create a great deal
of confusion. I cannot stress enough that these facts argue for the
Secretary to exercise all discretion that he has under the law to
simplify this program in every way possible to ensure that lowincome beneficiaries can, in fact, get some prescription drug coverage.
I would like to make five points.
First, the Secretary must address the unique circumstances of
dual eligibles. Dual eligibles will lose their Medicaid drug coverage
in January 1, 2006. I differ with some comments I have heard
about whether that is good or bad, but we do know that there will
no longer be a Medicaid wraparound benefit for these individuals
who have great health care needs.
To assure that they have no gap in coverage, dual eligibles will
have to choose a Part D plan between November 15 and December
31. They will need to be identified and provided clear information
and one-on-one assistance in order to do so.
States and state health insurance counseling programs, what we
call the SHIPs, and community-based organizations can be enlisted
to help dual-eligibles choose plans. Since the law authorizes the
Secretary to automatically enroll dual eligibles in plans, if they do
not do so themselves, any automatic enrollment must be followed
up by information and assistance to help individuals know how to
use their plan or how to choose a different plan if they wish.
Second, the Secretary must act to simplify, streamline and create
equity in the eligibility and enrollment processes for the low-income subsidies. A few ways that he could do this are to deem all
Medicare savings programs beneficiaries eligible for the low-income subsidy, eliminating the need for about a million people to
apply and enroll to get the subsidy, to permit all the states that
use more liberal methodologies in their Medicare savings program
process to use those for the low income subsidy, and to require the
Social Security Administration in those states that use more liberal
methodologies to use those as well, so there would be equity among

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92
residents of a single state, and to require that the simple application form and process that the law requires the Secretary and the
Commissioner of Social Security to create is available to all beneficiaries regardless of where they apply. We have heard a lot about
the assets test. The assets test will create barriers for people, both
because it will make people ineligible but also because it requires
enormous documentation. The Secretary must minimize the documentation required.
Third, the Secretary must require that clear detailed information
is provided directly to beneficiaries of Part D plans, not merely that
they be told about the availability of it, so that beneficiaries have
information about a plans formulary, the formulary design and
structure, the structure of any tiered cost sharing and which drugs
are included in each tier.
Beneficiaries will need to be directly provided notice when plans
add or remove drugs from their formularies or change their tiered
copayment system. Such notice must include clear information
about how the beneficiary can seek coverage of a drug removed
from the formulary or the review of a change in the drugs copayment.
Fourth, the Secretary must clarify the requirements for Part D
plans processes for determinations, reconsiderations and appeals to
assure that beneficiaries have access to an expedited review process for the coverage of drugs that are not on the formulary, for
drugs that have been removed from the formulary, and for changes
in copayment requirements.
Such clarification could include, as under Medicare Advantage,
that the physician can seek expedited review.
Fifth, the Secretary must increase substantially resources for
outreach, information, counseling and assistance that will assure
the availability of the one-on-one assistance that is going to be desperately needed by beneficiaries trying to navigate this extremely
complex system that has been created.
This should be done by funding the State Health Insurance
Counseling Programs at $41 million per year which is one dollar
per beneficiary, and providing resources for groups such as Janes
to do individualized community-based outreach and assistance.
I thank you for the opportunity to testify here today and I am
willing to answer any questions. Thank you, Senators.
[The prepared statement of Ms. Nemore follows:]

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110
The CHAIRMAN. Patricia, thank you very much, and to all of you
again, thank you. My questions will be somewhat general in nature, so as one responds, and the other feels they can add to or
need to take from, please feel free to do so as we proceed to do all
of this.
During debate on this bill, the biggest focus I think for all of us,
both in Congress and in organizations like yours, was on those seniors who did not otherwise have drug coverage and who just could
not afford it themselves.
This is a fairly generic question, but does this law substantially
when implemented, in your opinion, alleviate that underlying problem and the primary premise behind this legislation.
Gail.
Ms. WILENSKY. It does a lot more than that because it is a much
broader coverage bill, but it does focus an enormous amount of assistance on the low-income population which is where more of the
individuals without drug coverage lay. So the answer is that it will
cover some individuals who had drug coverage already with more
extensive coverage, but it will do a very good job in covering those
who are both without coverage and who were low income, particularly if it is as successful as the Presidents budget assumes it will
be in terms of reaching out to these individuals.
Again, our experience in past administrations and in other attempts to reach these low income populations, including but not
limited to my own efforts as HCFA administrator, is difficult. It is
difficult for all income-related programs that I am aware of inside
and away from health care, and we should not fool ourselves about
the difficulty, but some of the assistance activities that have been
mentioned will be helpful in making information clear and available.
The CHAIRMAN. Doctor.
Dr. THAMES. Senator, I would echo those statements. In the debate among the Board of Directors from AARP when this bill was
being formed and the decision for us to support this, one of the
early overriding factors in looking at what this bill was to do, was
that it was going to help meet the needs of those who truly suffered
the most particularly those with low income and those who had
catastrophic drug bills, and those who have to make terrible decisions about what to spend their money on or whether to take the
drugs in the appropriate doses or skip doses or skip days. We believe that this bill will help both those low income and those people
with catastrophic drug costs.
Ms. DELGADO. I think this is a very important bill in terms of
low-income people, not just because of what we discussed, but in
fact it moves CMS from being just a payer to being involved in peoples health and more of a public health agency because of some of
the other parts of the bill such as, getting your Welcome to Medicare physical, getting your diabetes diagnosed early. This changes
the whole flavor of what the agency is about, and for low-income
seniors, it is a major step forward.
The CHAIRMAN. Patricia.
Ms. NEMORE. Senator, we have provided coverage for low-income
people who did not have any coverage before and that will be tremendously important if the potential of the legislation is actually

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111
realized. The complexity of the eligibility process for the low-income
subsidy is substantial; you have two different places that you might
apply, there might be different rules that would be applied to you
in those two different places, you would be subject to two different
appeal systems. There is a lot of complexity in getting the subsidy,
the low-income subsidy, and then on top of that we have the issue
of choosing a plan and having the information you need to choose
one plan over another and assure that that plan will be able, in
fact, to meet your drug needs.
So there is potential here to help low-income people who have no
coverage. We have made it extremely difficult for them to do it, and
for the dual eligibles, they will lose the wraparound. Whether or
not the benefit is better or not better than what is in their state
now, they will lose the wraparound benefit that is applicable to all
other Medicare coverage for dual eligibles where Medicaid picks up,
fills in the gaps of what Medicare does not pay, and that is not permitted under this law. So I think it is a mixed answer.
The CHAIRMAN. OK. Patricia, you had mentioned and were suggesting some changes. At the same time, Gail has basically cautioned us in saying you better let CMS do its work before you start
proposing changes and get it on the ground and get it running, and
look at or you are going to be considerably further down the road
before anybody receives benefits.
Also, both of you have talked about dual wraparound, uniformity,
benefits back to the states, I would like to have both of you discuss
that a little bit, both the question of making changes now versus
getting done what we have gotten done, if you will, get it on the
ground and get it running, and also I watched this year, and the
past several years, as states that became increasingly generous in
their benefits in Medicaid having substantial withdrawal pains, if
you will, because of a reduction in revenues based on the economy
and shifts backwards.
In other words, what was not an entitlement, it was simply
added benefits pulled back, and the value of stabilizing that benefit, if you will, from a national standpoint, benefits to the states,
and the understanding that I have, while some states may have
been more generous, the value of a very small copay, if you will,
or a very small payment on a prescription by a prescription basis
to receive relatively uniformity in coverage.
Discussion about both of those I think would be valuable to the
committee in understanding it. Gail, let me start with you, we will
go to you, Patricia, and see if we cannot gain from both of your
knowledge in this area.
Ms. WILENSKY. In the late 1990s, states acted in ways that
many of us would regard as positive but set themselves up for a
lot of revenue obligations. They expanded the populations that they
made Medicaid available to, they increased the benefits, and they
increased the payments to providers, nothing that is bad in and of
itself, but potentially much more costly than they had been exposed
to.
There was a sharp decline in revenue, as you know, for many
states, and that has caused them to cut back, particularly in terms
of payments to providers, sometimes to the benefits as well. It is
unclear what will happen as the country is coming out of its reces-

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112
sion in terms of state revenues. We know what is happening at the
national level, but whether that translates immediately to the
states is less clear.
I say that because it is important to understand that while the
Federal Government is not going to share in whether states choose
to offer additional benefits to their dual-eligible populations or
other populations, states are permitted with their own money, of
course, to augment benefits in any way that they see fit, and they
will save money, although primarily not early on in the legislation
over what they would have been spending without the passage of
the Medicare Modernization Act, about 15 percent of what they
would have spent.
The other 85 percent comes back to the Federal Government
through the maintenance of effort sometimes called the claw back
provision. So precisely what will happen to individuals in some of
the states will depend on how both the state responds and how the
pharmacy assistance programs that exist in many of the states and
how the manufacturers programs go on.
But they will lose this wraparound largely, more than the majority, financed by the Federal Government in terms of adding on to
what already has existed. So we will have to wait to see.
Let me explain more carefully about why I feel so strongly about
not modifying the legislation before the legislation has primarily
rolled out which will mean the first or second quarter of 2006. People think that that means that CMS has until 2005, but they do
not. If the information is going to be mailed out in October 2005,
in order to get enrollment in November so that the benefit can
start in January 2006, an enormous number of decisions have to
be made by CMS and the Secretary. Rules have to be promulgated
in time so that people can have comments come back and then respond to all of those. Many people in Congress do not understand
the timeliness that that involves in order to have the decisions and
then the rules put out and then the comments reacted to from
those proposed rules.
Both of you seem quite sympathetic with that problem, but let
me give you some numbers to illustrate what happens if you come
up with a very controversial regulation which could well happen at
some point in implementing the Medicare Modernization Act.
My two experiences with controversial regulations were the Clinical Lab Improvement Act, CLIA, which had 35 or 40,000 comments only to be outdone by the proposed rule for the relative
value scale which produced 100,000 comments led largely by the
nations physicians, but joined in by other groups as well.
While the administrator does not have to respond to each comment specifically, all of the issues that are raised in comments
need to be dealt with when the final decisions are made. That is
why I feel so strongly that whatever errors are in this legislation
and all of us would have written the legislation somewhat differently if we could have, I think it is important to allow the major
parts of the legislation to roll out and then fix it.
There will be clean-up legislation. There always is. I am sure it
will be needed here, but the benefit is not going to happen if there
is legislative change before the rollout.
The CHAIRMAN. Patricia.

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113
Ms. NEMORE. Senator, my organization did not support the Medicare Act of 2003 and I intentionally today, in preparing my comments, did not address the issue of changes in the law that we believe need to be made.
The suggestions I made in my oral testimony, and there are more
in the written testimony, are all suggestions that we believe can be
done, that the Secretary and the Administrator have the authority
to do under the law.
The CHAIRMAN. Under the law. OK.
Ms. NEMORE. We believe because this is such a needy population
and such a hard to reach population and the law is so complex,
that it is essential that those decisions always be exercised to the
advantage of the beneficiary and to streamline and simplify the
process wherever possible.
The CHAIRMAN. OK. That is fair.
Ms. NEMORE. So on the matter of the Medicaid issue, I would
just like to make a couple of points. Medicaid does require that all
medically necessary drugs be covered, be available in the state
Medicaid program. That will not be true with any individual Part
D plan. Part D plans can choose what to cover and what not to
cover. It is true that states have limitations of one sort or another
and many states do, but they need, they have to have an override
process, so there is in virtually every state the opportunity to seek
coverage of any medically necessary drug.
But I think the real point is that there is no wraparound. It is
not whether Medicaid was better than Medicare. In the dually eligible contextthese are the neediest people we have in the entire
population in terms of health care needsthere has always been
the model that Medicare coverage is first and Medicaid fills in the
gaps, and that has been a very important way for dual eligibles to
get the complement of services they need because each program
has its own gaps, and together they provide fairly substantial coverage.
One other point on the Medicaid issue, Medicaid as Dr. Wilensky
said, Medicaid is more generous or less generous depending on individual state budgets, but it is subject to the political process, and
in the state of Connecticut where my program has its main office,
Connecticut advocates and citizens were able to persuade the legislature to remove copayments this year, so they were able to exercise their advocacy in the political realm to shape the program to
work best for beneficiaries.
This will not be true with Part D. Each plan will create its own
formulary, its own cost-sharing systems, and there will not be the
opportunity for political advocacy toward any individual plan.
But I think the issue of the wrap is really the most important
thing for us to keep in mind, the wraparound benefit.
Ms. WILENSKY. Senator Craig, may I add one more comment?
The CHAIRMAN. Surely.
Ms. WILENSKY. This is a very important issue and a number of
points have been raised that I think are important particularly for
this committee to understand. I do not disagree with some of the
concerns raised outside of the prescription drug area in terms of
the loss of a wraparound. But I think having Medicare and Medicaid as two separate programs was a bad way to have these extra

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114
benefits provided. The dual eligibles have long been regarded as
not only being by far the most expensive population by virtue of
their low-income and their medical needs, but not particularly well
treated because these two programs did not integrate with themselves very well.
To the extent that we think that the low-income assistance that
is being provided to individuals on Medicare is not adequate for
some of the Medicare low-income population because of their additional disabilities. It is important to augment the Medicare program and not have these two programs attempting to interact with
each other. It has been an extremely expensive program that is not
generally regarded as having functioned well. So while I appreciate
that there may be some benefits that have fallen off, I think we
will be far better off to try to augment them in a very selective
basis for low income disabled Medicare beneficiaries than to think
about the two programs lying on top of each other. That just is not
a model we should try to replicate.
The CHAIRMAN. I have taken way more than my time. Let me
turn to my colleague, John Breaux.
Senator BREAUX. Thank you very much. Ms. Nemore, I had supported the Medicare-Medicaid wraparound. But we did not have
the votes to do that, and, of course, for my state of Louisiana, being
in a Medicare program which was a guarantee and an entitlement
is far superior to being in a Louisiana Medicaid program where you
never know what you are going to get from year to year.
It is already a program that is severely limited. I think they can
only get six prescriptions filled and that is it. They never know
whether it is going to be there the next year or not. So the concept
of putting it all under the Medicare program was what we ultimately came up with, and I think Ms. Wilenskys suggestion is we
want to do more for seniors, we can increase it, which I am sure
the pressure will be there to do.
But there is nothing that prohibits states from using their own
state money to continue to do a wraparound if the state is fortunate enough financiallymaybe Connecticut would be one of those;
Louisiana certainly is notto be able to do it. If they think it is
in their states interest and they can afford it and it is a proper
use of funds, the state is not prohibited either under the discount
card or under the Part D when it comes into effect to provide additional assistance. Does that not address some of your concerns?
Ms. NEMORE. Senator, as you noted, your state of Louisiana
would be hard-pressed to provide that kind of assistance because
Senator BREAUX. No, no, they would not be hard-pressed. They
would not do it, period. Hard-pressed is being generous. [Laughter.]
Ms. NEMORE. It, as many states in the country that have substantial need, has a very high Federal match for Medicaid, so for
those States to undertake this with their state dollars is very difficult.
Senator BREAUX. I was on your side. I argued for it, but we just
did not end up with it. Ms. Delgado, is your organization using all
of these senior groups to help them and pointing seniors to senior
centers and other type of organizations out there to help them educate the members? I mean this is a real tough problem. I think

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that if you are 65, and as I get closer to that number, I think I
am going to be still smart and intelligent and can use my computer, but certainly my fathers generation does not even have a
computer. I mean he would not know how to turn it on and would
not want to learn, and it is very difficult for them to find where
the information is on these new programs.
I really think that these senior organizations can be particularly
helpful in providing that type of information to seniors. I mean is
that part of what you are attempting to do?
Ms. DELGADO. Most definitely. But it is not just the senior
groups. It is also the community health centers.
Senator BREAUX. Sure.
Ms. DELGADO. It is the Meals on Wheels people.
Senator BREAUX. Good.
Ms. DELGADO. It is everyone who may touch someones life or the
life of a child who may have a parent that they can influence or
help through the process. So really through ABC and through our
own organization the Alliance, it is reaching out to people in whatever ways we can to get them the best information.
I have to tell you that one of our earliest concerns was that people were concerned about the program because they kept being told
it is confusing and complicated.
Senator BREAUX. There were some who were intentionally arguing that point vociferously.
Ms. DELGADO. Of course, but what we did is we took the people
and told them, well, let us take a step back and see what you have
to do, which is why we came out with a workbook for people to use,
and once they worked through that workbook, they see, well, this
is just listing all my medicines, this is knowing if my pharmacy accepts this card, this is calling this number, so it is making it simpler.
You know government programs are not known for their simplicity. But at the same time, the access to the low-income senior
that this provides for their medicine is stupendous.
Senator BREAUX. I like what Dr. McClellan said when he talked
about the 1800MEDICARE number that seniors or anyone could
on behalf of a senior dial up and say, Here is what I am taking,
here are my five prescriptions or even more. Then say which card
best fits what my needs are. Have you all ever taken a look at
that? I mean is that something that is working, has the potential
to work better, can you give me some kind of a feeling from the
users side?
Ms. DELGADO. Actually when the program first started, we had
regular contact with CMS asking them to make things simpler,
some of the Spanish language. At ABC, we have our own web site
that we started. It gives a lot of information, also works seniors
through it. We also give them access to another web site that really
gets seniors involved in any senior program that they are eligible
for. So its really giving people tools. We have worked with CMS
to get them to train local community-based groups on what they
need to know and do.
So, yes, it is working, but I have to say this is anand I have
been in Washington 25 years working with DHHS all this time
and the CMS staff are working with the community-based organi-

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zations, and that is a new relationship. Sure, it has its bumps, but
I think they are moving in the right direction.
Senator BREAUX. Thank you. Dr. Thames, there is no means testing for the drug program.
Dr. THAMES. Correct, sir. You mean the assets?
Senator BREAUX. I mean means test, assets test. I mean you are
eligible for the discount card. You are eligible after 2006 for the
Medicare insurance program that will cover prescription drugs
whether you are making $25,000 of income or whether you are clipping coupons fortunately for $3 million a year. So there is no
means test there.
There is a means test for the first time for Part B for medical
services. I guess that is what AARP is objecting to?
Dr. THAMES. Well, what we are concerned about is the Congressional Budget Office says that there will be 15.2 million people who
are below 150 percent of the poverty level in 2006. Of that number,
13.4 million of those people will be eligible for Part D. That 1.8 million of those people because they have assets will not be eligible
under Part D. Is that incorrect?
Ms. NEMORE. For the low-income subsidy.
Senator BREAUX. I do not think that is correct.
Ms. NEMORE. Would not be eligible for the low-income subsidy.
Senator BREAUX. Oh, yeah, sure, for the low-income assistance,
yeah.
Dr. THAMES. For the low-income.
Senator BREAUX. Are you objecting to
Dr. THAMES. We feel that these people are low-income people and
that it is wrong with their low incomes to deny them a needed subsidy because they have managed to put aside a small amount of
savings for their retirement, which was what we were trying to encourage our people to do.
Senator BREAUX. OK. So AARPs objection is to the asset test?
Dr. THAMES. Yes, sir, the asset test. I am sorry if I did not make
that clear.
Senator BREAUX. To become eligible for the subsidy?
Dr. THAMES. Yes, sir, that is our problem because we feel that
it is wrong to penalize these people with very low incomes who
have worked hard and put aside money that we encouraged them
to do for their own retirement and then those assets, particularly
at such a low level of assets, for them not to be eligible then for
the low-income provisions.
Senator BREAUX. You would not argue against any asset test or
would you?
Dr. THAMES. Well, we have said we are against the asset testing,
but we have also said if we are going to have asset testing, we
think the present levels are too low, Senator. That is in our own
discussions.
Senator BREAUX. OK. Thank you, Doctor. Ms. Wilensky, I guess
what you are saying, If it aint broke, dont fix it yet?
Ms. WILENSKY. Well, even if you think it is not working as well
as you would like it, hold off, let it start, we will discover problems
for sure, fix it after it starts.
Senator BREAUX. Yeah, I think that anything as monumental as
this bill is to start trying to change it 2 months after it is imple-

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mented is something we do not have the capacity to do nor should
we. Let us see how it is going to work, give it some time. Obviously, it was written by humans. It is not perfect, and as always,
there will be opportunities to improve upon it, but do not try and
do it before the ink is dry on the program. Let us get it set up. It
is not completely implemented yet; we have made great progress.
If you get four million people, I guess, Mr. Chairman, enrolled in
the drug discount card after only a couple of months, that really
is very significant, and I think it is going to improve, and it is
going to get better with people like yourselves helping people to understand it.
So I think all of you have been helpful and provided some good
information and thoughts and we thank you for it. Thank you.
The CHAIRMAN. John, thank you very much. This will be my last
question of the panel. I think it goes without saying that assistance
in paying for drug benefits helps low-income seniors economically.
We do not really argue that. But what effect do you expect greater
access to drugs to have to the health status of seniors in low-income populations, especially considering that serious health problems are often more prevalent among low-income seniors.
Dr. Delgado, I am especially interested in hearing from you in regard to your experience with the health status and the needs, let
us say, of the Hispanic community. We are interested in helping
people stay healthy or get healthier, and we now know, of course,
that prescription drugs is the same argument but in a different
context that we made 30-plus years ago as it related to access to
hospitals. Would you respond to that and then any of you who wish
to do follow-up on your own comments in relation to health versus
economics? We think clearly we are helping them economically. Are
we helping them from a health status? Yes.
Ms. DELGADO. Let me just make three points. First, in terms of
health, the fact that people will now be able to take their medicines, for example, for diabetes means they will not have to wait
to go to the hospital to have an amputation, that they will be able
to have better health.
The second thing is that as part of the change in the mind-set
of CMS, the Welcome to Medicare physical starts talking about
health promotion, disease prevention, very important for peoples
health because before people only went when they were sick to use
their benefits. Now, there is an opportunity to say these are the
things that you can do to prevent illness and to prevent the consequences of illness.
The third thing is that people need to have access to the full
range of medicines. We know, for example, that for Hispanics, for
Mexicans in particular, there is data showing that the absorption
rates of some medicines are three times the amount than it is for
non-Hispanics, meaning people would take their medicines and become ill, and they would go to their doctor, I do not want my medicine, the doctor would say,Oh, my patient is non-compliant, but
really it was not the right thing. By having a system that will
cover both generics and brands, we let the physician and the patient decide which is the best medicine for that patient to live a
better life.

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So it improves the economics, but the health of the person is critical. That means a person can stay home and live the kind of life
that we want all our seniors to have.
The CHAIRMAN. Patricia.
Ms. NEMORE. To the extent that the drug plans are able to actually, are covering the drugs that any individual needs, the low-income assistance provided by this legislation will allow people to not
have to choose between taking medicine or buying food. That is
often a choice that is made by people living on very limited incomes
and this benefit can provide some relief for that. We are very concerned about the formulary rules and what can or cannot be covered. The plans have enormous discretion in designing their
formularies and may, in fact, not cover a number of drugs. Even
if a person found a plan that covered some of their drugs, it might
not cover all of their drugs. So there may well be gaps that would
still require people to be paying large amounts of money for their
drug coverage.
But to the extent that people do not have to choose between food
and medicine, that would be a good thing.
The CHAIRMAN. So you can conclude from this also that in the
general sense, fully implemented, while you dislike certain portions
of it and would have done it differently, it should in the end
produce a healthier senior population?
Ms. NEMORE. If we have formularies that allow people to get access to the drugs they need, yes.
The CHAIRMAN. OK. Dr. Thames.
Dr. THAMES. As a family physician who practiced for over 40
years, I am very much impressed with a number of things about
the bill, and I will just mention again the physical examination you
can get, the fact that we are going to have chronic disease management, we are going to be able to discover disease sooner and treatment is going to be more cost-effective. We are going to be able to
keep more people out of the emergency rooms where costs go up,
but we are also going to pay for comparable studies for efficacy of
drugs, so we are going to decide in the same class of drugs which
ones are the most cost-effective to do the same job, and that should
make it a benefit, and poor people who have been unable to get the
drugs that they need should be able to get not only the drug they
need, but we are going to have scientific studies to determine what
is the most cost-effective drug that they need for their diabetes or
their cardiovascular disease.
So I definitely feel that it would be very beneficial to those folks
to identify their disease problems earlier and give them medications that keep them out of the emergency rooms and hospitals and
begin to improve their life expectancy to come closer to what it is
for more middle income Americans, where it is markedly below
that now.
Ms. WILENSKY. Dr. Thames mentioned a number of points that
is important for the aging community in particular to be mindful
of, that in this bill, it is primarily a prescription drug bill. But
there are a number of very important other provisions like the
studies for chronic care, which is dominating the ill health of Americans, like the disease management focus, the important preventive
health care benefits that were included, and that when you think

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about how anachronistic Medicare has been, up until the passage
of this bill, focusing on inpatient drug coverage and physician and
hospital, home care and nursing care, but excluding outpatient
drug coverage, something that is hard to imagine any other type
of insurance plan doing for the last 15 years, this bill really moves
forward in terms of allowing people to have better health because
they have fuller health care coverage and because we are pushing
forward on trying to organize how that care can be provided for
chronic care and disease management purposes.
The CHAIRMAN. Well, as each one of you have said, you would
have done it a bit differently. I think that is probably true of 100
senators and 435 House members. The reality is we did tackle a
very large problem and try to resolve it.
Now, of course, the detail of it being brought through regulation
is critical and that is why we are here today, and that is why we
will probably ask you or your colleagues to be back again and again
as we watch in progress this effort taking shape. I do agree that
I think we should be tremendously cautious as public policy people
about suggesting changes before the fact.
If it is clear within the context of the law, as Patricia has pointed
out, maybe that is a nudging of CMS in the right direction or in
a slightly different direction than they may be taking, but I think
Congress will be cautious in that. We are very anxious to see it on
the ground in a timely fashion so that seniors can begin to receive
the benefits as was directed by this, as has been directed by this
legislation.
So we thank you for your presence today and your diligence. As
I say, we will have you back again. I think it is important that we
build a record, a record that CMS can look at knowing that we are
watching them closely, as we move toward full implementation of
what is in my opinion landmark legislation. We thank you all for
your time here today. The committee will stand adjourned.
[Whereupon, at 3:58 p.m., the committee was adjourned.]

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