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McClellan Gets an Earful in First Hearing on Medicare Drug Benefit

FEBRUARY 2, 2006 -- For the first time since the Medicare prescription drug benefit started Jan. 1, administration officials appeared at a hearing on Capitol Hill to defend their handling of the drug benefit rollout. And they got an earful from senators who are angry about the problems some beneficiaries have had.

At a hearing before the Senate Special Committee on Aging, Centers for Medicare and Medicaid Services Administrator Mark B. McClellan vigorously argued that legislation would not be necessary to smooth the transition for many of the "dual eligible" seniors who are being transferred from Medicaid to Medicare drug coverage. Some beneficiaries have had higher co-payments because of incomplete or inaccurate information in databases used to determine who is eligible for the drug benefits.

McClellan also said his agency saw no need to extend the May 15 deadline for general enrollment. Democrats plan to offer an amendment to the tax reconciliation bill that would extend the enrollment deadline.

McClellan said CMS had decided to extend from 30 days to 90 days the period during which plans must cover a patient's prescription if the drug isn't on the new plan formulary. That move would give seniors more time to check with their doctors and determine proper treatment if their drug plan does not offer the medication they had been taking, McClellan said.

Committee Chairman Gordon H. Smith, R-Ore., asked McClellan why the agency hadn't stepped in earlier. "Many of these problems are problems we foresaw," he said, asking McClellan why the warnings were not heeded. McClellan responded that Medicare had made some adjustments before the drug plan started and they were "watching very closely" to see whether any other problems arise.

But Democratic senators blasted the administration's handling of the new benefit. "We should scrap this and start over," said New York Democrat Hillary Rodham Clinton. "It is an absolute embarrassment, outrage, heartbreaking disappointment."

But Rick Santorum, R-Pa., said such calls are premature. "We should not be so flippant in casting out babies with bath waters," he said. "With compromise, you don't get the optimal solution. But it was the best we could accomplish given the deep divisions in Washington."

Senators also complained about the complexity of the new drug benefit in which seniors can be faced with scores of drug plans to choose from.

"We're going to see competition lead to more simplicity," McClellan said. "We do want to make it even easier" for seniors to sign up, he said.

That remark prompted an outraged Sen. Ron Wyden, D-Ore., to shout over McClellan: "Even easier? Even easier? It is bedlam out there."

But McClellan said "looking at simplifying it is the next step," once the enrollment problems are ironed out. He said market pressures would lead to greater simplicity, adding that more plans are already using standard forms instead of making providers fill out lengthy paperwork.

McClellan presented a Department of Health and Human Services report that the federal government will spend about 20 percent less per person in 2006 and 10 percent over the next five years. Payments are projected to be more than 10 percent lower than first estimated. He also noted that average premiums were now at $25 a month.

The Centers for Medicare and Medicaid Services announced on Thursday that the net cost to the federal government for the drug coverage in 2006 is expected to be $30.5 billion. That's down from a previously estimated $38.1 billion.

The actual costs to the federal government, accounting for Medicaid savings, are also significantly lower over 10 years, dropping from last year's estimated $737 billion to $678 billion, according to CMS.

CMS estimates that the cost of the Medicare drug benefit without accounting for Medicaid savings from 2006–15 is about $130 billion less—$797 billion—compared with an estimated $926 billion last year.

States will save $37 billion over 10 years because of the revised estimates of the drug benefit's cost, according to CMS. States are on the hook for part of the cost of the Medicare drug benefit under the Medicare overhaul law (PL 108-178).

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