Federal News Service
HEADLINE: HEARING OF THE OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE DISTRICT OF COLUMBIA SUBCOMMITTEE OF THE SENATE GOVERNMENT AFFAIRS COMMITTEE
SUBJECT: DOES CMS HAVE THE RIGHT PRESCRIPTION? IMPLEMENTING THE MEDICARE PRESCRIPTION DRUG PROGRAM
CHAIRED BY: SENATOR GEORGE V. VOINOVICH (R-OH)
WITNESSES PANEL I: MICHAEL MCMULLAN, DEPUTY DIRECTOR, CENTER FOR BENEFICIARY CHOICES, CENTERS FOR MEDICARE AND MEDICAID SERVICES;
GAIL R. WILENSKY, PH.D., SENIOR FELLOW, PROJECT HOPE;
NANCY-ANN MIN DEPARLE, SENIOR ADVISOR, J.P. MORGAN PARTNERS, LLC
LOCATION: 342 DIRKSEN SENATE OFFICE BUILDING, WASHINGTON, D.C.
SEN. PRYOR: Thank you, Mr. Chairman. Thank you.
Let me first ask a question based really on my old job as attorney general of the state of Arkansas. In my four years there we had a number of incidents where scam artists or, you know, rip-off artists might come in to seniors and tell them about drug cards, you know, and all these wonderful drug cards. Then they'd get them and they'd take them down to the local pharmacy and they were worthless. Or we also had another occurrence, and that was there were legitimate companies that were aggressively marketing drug cards, but when you actually took the drug card to the pharmacist, they really didn't live up to the seniors' expectations.
So now the Congress has passed into law and the president has signed a bill that we'll have a national drug card. And so my question for the two of you is should CMS-given the context of the potential for fraud and scams, et cetera, should CMS somehow begin educating the public to beware of bogus drug cards and wait for the real drug card. I'd just like to get you all's thoughts on that.
MS. DePARLE: Yes. And it's my understanding that there have already been-there has been a spike in the incidents of the type you're describing, where there have been perhaps some new shysters who are out going door to door with what they are offering as cards, and asking for payment for them. And I think the agency's put out an alert on that, but it may be that it will require something more aggressive, either from CMS or the Justice Department or someone.
MS. WILENSKY: Yes. I have read already that exactly the situation you're describing has indeed been happening. There has been an alert. There's a lot of money at stake here that usually invites scam and fraud artists to join, and I think it will be very important that while everything else is going forward, that there is some attention being paid, both so that you don't frustrate the seniors and bilk them of funds and of course the taxpayers as well.
SEN. PRYOR: Right. And one thing, Mr. Chairman, that does concern me about this is a lot of times these scam artists and, you know, these folks who are going to rip seniors off and prey on the unsuspecting, a lot of times they'll take some sort of event out there that it sounds plausible, you know, and all of a sudden they come in and offer some sort of service to us. We had that after 9/11, where people would come in and try to rip people off and say, we're sending money to New York City, and they weren't. You know, so you see it in a lot of contexts. And I just kind of see that potential right there, so I'm glad to hear that CMS is taking steps.
Let me also ask about something else that made a lot of news in the last few weeks, and that is Tom Scully's-let's say his-potentially where he told one of his employees not to be candid with Congress. In my view, it's extremely important that your agency-your former agency is candid with Congress, because we're the policymakers, we're going to pass this law, and now a lot of us feel like that we were not dealing with accurate information as we were deliberating this. And let me just ask, from you all's experience at HCFA, now CMS, are you aware of anything like this happening on your watch when you were there, when you or someone told Congress not to-or told someone in the agency not to provide information to Congress? Are you all aware of anything like that?
MS. WILENSKY: I am not. I actually had a conversation with Guy King, who was the chief actuary for 16 years or so, including the period when I was there, and I know during both President Carter and the Reagan/Bush administration. Now, there does seem to be some change. He indicated it would have been very uncommon for the HCFA actuary to have conversations with the Congress on new legislation, unless it involved the trust fund. That normally that would not have been a conversation.
There is a long history of CBO and HCFA actuaries having different estimates, and normally my experience was that once CBO had made a pronouncement about new legislation, Congress really didn't care what administrations said, because Congress basically trusts its advisors with CBO, and not the administration. That's why the CBO was created. But I am not aware of somebody either being directed or threatened to not come forward with information.
SEN. PRYOR: Right.
MS. DePARLE: I worked with Rick Foster for three years when I was administrator, and it was an honor to work with him. And not only did I not ever instruct him not to give information to Congress or to be candid with Congress, in fact, I urged him to speak directly with members of Congress whenever they needed information, and not to even tell me what they asked, because I do think there's a public interest in members of Congress having as complete and accurate information as they can have. Actuaries can be wrong, so can economists, but I think we as citizens have an interest in your having as much information as possible when you make your decisions.
SEN. PRYOR: Yeah. Well, thank you, and I agree with you both on that. Mr. Chairman, if I may, I'd just like to ask one or two more questions. And that is a little bit of a follow-up on Senator Durbin a few moments ago. He quoted an interview by Tom Scully. And one of the things Mr. Scully said, he said, "CMS is not going to be a passive payer anymore. CMS is going to be a market organizer." I was curious if you all had any thoughts on his comment there, that CMS would-its role has changed so much that it will now, under this bill, be a market organizer.
MS. WILENSKY: Well, CMS follows administered pricing for its most part. That is set in statute. It pays a price for individual physician services or hospital discharges or nursing days that is not negotiable. So to that extent, it has been passive. But it hasn't been passive in a lot of other ways in terms of who is allowed to participate, focusing on quality and appropriateness, and in some ways has made it very difficult for the agency, because while prices are set, whether or not there's other activities that are appropriate are determined by the agency.
I presume what he was referencing is the bidding process that will go on, both for Medicare advantage and for the Part B drug-the private prescription drug plan participation. We'll see whether or not there is enough participation to have very much competition. I mean, I'm a big supporter of the federal employees' healthcare plan, which has negotiation that goes on with the plans that's always made some sense. But I think it's a little early to pronounce a dramatic change. This is influencing only, at least at this point, a relatively small part of the Medicare program. If the HCFA, as assumed as actuary, is correct and there is very substantial participation in the Medicare Advantage program, which is one of the reasons that there was such a big difference, you could see substantial movement to having the agency become involved in price negotiations because it would take it out of the administrative pricing.
But I would like to remind the Congress that both the actuary and CBO radically misestimated-overestimated the participation of private plans in the Medicate Plus Choice program, the actuary even more bullish than CBO. So I think it's a little early to pronounce this major difference for all of the agency but your choice is either to do administrative pricing or some other process to try to have a way to moderate spending. This bill does go for a bidding process and in fact it's why CBO has said, after the fact, that it wouldn't score any savings if the administrative pricing was put in place in negotiation because it thinks, at least in the short term, this is as promising.
SEN. PRYOR: Do you have any comments on that?
MS. DePARLE: No. I'm sitting here trying to guess what he means by that. I'm not even really sure.
SEN. PRYOR: Mr. Chairman, if I may ask one last, is that okay?
Again, Mr. Scully, in this interview, said you're going to find that-he says, "In fact, most of the expertise to pull this off, this new Medicare drug benefit at CMS lies on the Medicaid side of the agency. I can tell you, having run the place for three years, the relationship between the people who run Medicare and the people who run Medicaid is a little like the Serbs and the Croatians. They don't really talk to each other that much."
I'm curious about you all's experience there with the Medicare side versus the Medicaid side and who, in the agency, has the expertise to administer this.
MR. WILENSKY: Well, the reason Medicaid would be more relevant, although not at the federal level, is Medicaid covers prescription drugs. So a lot of the issues that you might need to deal with are dealt with in Medicaid. The fact is, at the federal level, it's mostly oversight and Medicaid is basically, from my view, a state program that has federal oversight, very different from Medicare, which clearly is a federal program.
I actually disagree with the characterization between Medicare and Medicaid. When I came there, I pulled the people out of Medicare who were working in both Medicare and Medicaid and created a center for Medicaid or Medicaid bureau because I was afraid Medicaid was getting short shrift by having the same people working in both areas because Medicare dominates everything that HCFA did, CMS does, because it is its program. And it was a way to try to give more attention and focus to the people who did work in Medicaid.
But I am not aware-do not believe, at least when I was there, there was any friction or difficulties. I think that some of the issues in the pharmacy program now will have to be helped by bringing in people from the private sector who have worked for PBMs. They are the closest because a lot of them-or from insurance companies who worked on the prescription drug side. If you want to get some private sector expertise, the fact is I don't think either Medicare or Medicaid provides the right expertise.
To the extent that you're using private prescription drug plans, however, it doesn't require the hands-on expertise that Medicare needs when it's trying to price out DRG351 or which of all the 9,000 CPT codes gets included in the RBRVS. One of the advantages of having the kind of program structure that's put in place is Medicare actually isn't responsible for individual price negotiation of individual drugs or their presence on the formulary. That's done by the plan and Medicare's major involvement is in the bidding process and the geographical decisions, the appeals and the rights processes that are associated for the seniors. So I'm not sure that you even need the kind of experience. But I would definitely not characterize the relations between the two groups in the way that Tom Scully chose to.
MS. DePARLE: I agree. I would not characterize it that way either. I didn't see friction. I do think that there is-I think every administrator struggles with trying to balance the focus on the two programs and, frankly, I came out of the state of Tennessee where I'd worked on Medicaid issues and for every-I think the agency's focus is, to some extent, reflective of the administration's focus and the Congress' focus. Now, President Clinton was very interested in Medicaid. So we'd spent quite a bit of time on it. But the fact is, for every one letter I got from a member of Congress about Medicaid, I got 50 about Medicare and perhaps that is somewhat symptomatic of the time I was there because I was there during the Balanced Budget Act and, as we discussed, every provider in the country was upset about getting their Medicare reimbursement cut.
So I found it was just difficult to spend as much as time on Medicaid as I would have liked. I think what he is referring to-but I didn't find the Serbs and Croatians. What I think he's referring to is that there are two career staff in the Medicaid Bureau who had experience with the prescription drug rebate at all, which I know you know about, and they had a lot of the intellectual capital when we began looking at prescription drugs and the pharmaceutical companies and those sorts of things that CMS has never dealt with before. Those two gentlemen had the experience in dealing with them.
But, as Dr. Wilensky says, you know, substantial intellectual capital will have to be built now, building what is there in Medicaid as well as bringing in some people from the private sector. A lot of this, though, is not even going to be intrinsic to prescription drugs. It's just getting rules written, figuring out how to oversee contracts, the hard stuff that you talked about earlier in your statement. And that, I think, you could bring over some good people from SSA, if there are some people who could be spared, some of the other agencies who do that kind of thing and get them on kind of a swat team to help the agency. That's what I would be looking at.