Beneficiary Information and Decision Supports for the Medicare-Endorsed Prescription Drug Discount Card

CRS Report for Congress
Beneficiary Information and Decision Supports
for the Medicare-Endorsed
Prescription Drug Discount Card
March 24, 2005
Diane Justice
Specialist in Gerontology
Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

Beneficiary Information and Decision Supports for the
Medicare-Endorsed Prescription Drug Discount Card
On December 8, 2003 the President signed into law the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (MMA, P.L. 108-173). This
legislation establishes a Medicare prescription drug benefit, effective January 1,
2006. In the interim, the legislation requires the Department of Health and Human
Services (HHS) to establish a temporary program of Medicare-endorsed prescription
drug discount cards.
The program has two objectives. One is to provide access to prescription drug
discounts to Medicare beneficiaries who voluntarily enroll with a private card
sponsor. The second is to provide low-income beneficiaries with transitional
assistance to pay for some of their prescription drug costs until 2006, when the new
Medicare drug benefit begins. Despite concerted efforts by the Centers for Medicare
and Medicaid Services (CMS), 25% of the 7 million low-income beneficiaries who
qualify for transitional assistance have enrolled in the card. Low-income Medicare
beneficiaries could realize the most tangible benefit from enrolling since they would
receive transitional assistance of $600 for both 2004 and 2005. Those who did not
enroll in 2004 can do so by March 31, 2005 and receive the full $600 for 2005.
Beneficiaries can select from 38 national discount card programs offering
different prices for specific drugs, some variation in covered drugs and distinct
pharmacy networks. Thus, beneficiaries have many considerations when selecting
a card. To make such a choice, they first need to know the program exists. Next,
they need both information to determine whether to enroll in the program and
decision supports to help them select the card most suited to their own circumstances.
Many of the same outreach and education methods CMS has used in the past to
inform beneficiaries about new Medicare benefits are being employed and intensified
for the discount drug card program. In particular, CMS has placed increased
emphasis on the Internet as an information vehicle for beneficiary information.
Some observers have commented that the complex decisions beneficiaries must
make about program enrollment and card selection have led to confusion and inaction
among older people. These factors, coupled with the approximately 70% of
Medicare beneficiaries who are unable to use the Internet for any purpose, some
suggest, have constrained program enrollment. CMS has improved its outreach and
education strategies as it obtained more beneficiary feedback. Many acknowledge
that reaching low-income people with information that would encourage their
enrollment in new programs is a difficult challenge — one faced by many
governmental programs.
The outreach and education experience of the discount card program can offer
lessons for implementing the Medicare prescription drug benefit beginning in 2006.
Then, decisions beneficiaries must make are likely to be more complex and the stakes
higher for not enrolling and/or selecting a prescription drug plan that does not target
an individual’s needs as well as alternative plans. This report will be updated.

Program Enrollment Challenges..................................2
Current Program Enrollment.....................................3
Evolution of Beneficiary Outreach and Education Programs................4
Enactment of Medicare.........................................4
Beneficiary Outreach.......................................4
Beneficiary Enrollment.....................................5
Omnibus Budget Reconciliation Act of 1990: Medigap Plan Choices.....5
Balanced Budget Act of 1997: Choice of Managed Care Plans..........6
Written Materials..........................................7
Toll-Free Number.........................................7
Website .................................................8
Nationally Coordinated Educational and Publicity Campaign.......8
National Medicare Education Program.........................9
Medicare Modernization Act of 2003: Prescription Drug Benefit and Discount Card
National Publicity Campaign....................................10
GAO Legal Opinions Requested.............................10
Publicity About the Prescription Drug Discount Card.............12
Medicare Internet Website......................................12
Prescription Drug Assistance Program........................12
PDAP Changes...........................................13
Toll-free Telephone Help Line...................................14
Call Volume.............................................14
GAO Evaluation..........................................15
Written Beneficiary Materials...................................16
State Health Insurance Assistance Program.........................16
Additional Community Outreach.................................18
National Medicare Education Program Budget......................19
Factors Influencing Beneficiaries’ Response to Outreach Efforts............20
Research on Communications and Decision-Making.................21
Health Literacy...........................................22
Communication Vehicles Preferred by Older People.............23
Influence of Discount Card Design Features on Enrollment............24
Conclusion ......................................................26
Appendix A. FY2004 Total SHIP Grant Awards........................28
List of Tables
Table 1. National Medicare Education Program FY2005 Budget...........20

Beneficiary Information and Decision
Supports for the Medicare-Endorsed
Prescription Drug Discount Card
On December 8, 2003 the President signed into law the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (MMA, P.L. 108-173). This
legislation establishes a Medicare prescription drug program,1 effective January 1,
2006. In the interim, the legislation requires the Department of Health and Human
Services (HHS) to establish a temporary program of Medicare-endorsed prescription2
drug discount cards.
The program has two objectives. One is to provide access to prescription drug
discounts to persons who voluntarily enroll with a private drug card sponsor. The
second is to provide low-income beneficiaries with transitional assistance to pay for
some of their prescription drug costs until the new Medicare prescription drug benefit
becomes available in 2006. Despite concerted efforts by the Centers for Medicare
and Medicaid Services (CMS), 25% of low-income persons who qualify for the
program’s transitional assistance have enrolled.
All beneficiaries who currently lack private coverage for prescription drugs
might benefit in varying degrees from enrolling in a drug discount card and gaining
access to negotiated drug prices. Low-income persons could realize the most
tangible benefit from enrolling since they would receive transitional assistance of
$600 for each of 2004 and 2005 to be applied to their prescription drug costs. Those
who did not enroll in 2004 can do so by March 31, 2005 and receive the full $600
transitional assistance for 2005. A pro-rated amount will be awarded to persons who
enroll later in the year. As a practical matter, the transitional assistance is provided
as a credit though the drug card and declines as the beneficiary uses it to purchase
prescription drugs.
Medicare beneficiaries eligible for the drug card credit have annual incomes
equivalent to 135 % of poverty or less. In 2005, that equals $12,919 for an individual
and $17,320 for a couple. In determining eligibility, income from most sources is
counted, with the exception of Supplemental Security Income (SSI), other public
assistance benefits, and certain types of insurance payments. Assets are not

1 For additional information on the new drug benefit see CRS Report RL31966, Overview
of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, by
Jennifer O’Sullivan, Hinda Chaikind, Sibyl Tilson, Jennifer Boulanger, and Paulette
2 For additional information on the drug discount program, see CRS Report RL32283,
Medicare-Endorsed Prescription Drug Discount Card Program, by Jennifer O’Sullivan.

considered. Persons who have prescription drug coverage through retiree health
plans or federal employee health insurance cannot participate in the program. Low-
income Medicare beneficiaries who are also enrolled in Medicaid receive drug
coverage through that program and are therefore not eligible for transitional
assi st ance.3
Program Enrollment Challenges
When implementing any new public program, federal agencies are faced with
the challenge of making the intended participants aware of the new benefits and
getting the assistance to people who need it the most. When the target population is
low-income older persons, achieving a significant level of program enrollment is
particularly difficult. Based upon the experiences of other federal programs targeted
to this group, intensive education and outreach efforts are required, and even then,
significant proportions of the eligible population may not participate.4
Several factors present particular complications in designing information
strategies targeted to low-income Medicare beneficiaries. Literacy rates among low-
income persons are lower than for the rest of the population.5 In addition, low-
income beneficiaries are less likely to have access to certain communication vehicles
frequently used to disseminate program information, particularly the Internet.6
Finally, some research indicates that there are age-related cognitive declines in the
ability to comprehend comparative information and apply it to one’s own
ci rcum st ances.7
For the drug discount card program, not only does information about the
program need to reach low-income beneficiaries, but information also needs to
facilitate their ability to choose which card bests fits their needs. Individuals can
choose from 38 cards available through sponsors operating nationally, and depending
upon their state of residence, additional options may be offered in their geographic
area or provided exclusively by managed care plans for their enrollees.
While low-income persons enrolled in any card can receive transitional
assistance credited toward their drug expenditures, the cards have different prices for

3 Medicare beneficiaries who are also enrolled in the Medicaid program — the dually
eligible — will receive drug coverage under the new Medicare prescription drug benefit
beginning in January 2006.
4 Dahlia K. Remier and Sherry A. Giled, “What Other Programs Can Teach Us: Increasing
Participation in Health Insurance Programs,” American Journal of Public Health, vol. 93,
no. 1, Jan. 2003.
5 Institute of Medicine, Health Literacy (Washington, D.C.: National Academies Press,

2004), p. 64.

6 Susannah Fox, Older Americans and the Internet, Pew Internet and American Life Project,
Mar. 25, 2004.
7 Judith H. Hibbard, Paul Slovic, Ellen Peters and Melissa Finucane, Older Consumers’ Skill
in Using Comparative Data to Inform Health Plan Choice: A Preliminary Assessment,
AARP, Sept. 2000. (Hereafter cited as Hibbard, Older Consumers’ Skill.)

specific drugs, some variation in covered drugs and distinct networks of participating
pharmacies. Thus, beneficiaries have a number of distinctly different factors to
consider when comparing and selecting a card.
Current Program Enrollment
As of February 2005, nearly 6.2 million beneficiaries were enrolled in a
Medicare-endorsed drug discount card. Of these, only 1.7 million persons received
the low-income credit,8 a number significantly below expectations. When the
program began, CMS estimated that 7 million persons would quality for the $600
annual credit and 4.7 million would enroll.9
Almost half of the 6.2 million card participants were automatically enrolled by
entities that had the authority to act on their behalf. Of these, at least 2.4 million
persons were enrolled in a card by their Medicare managed care plan, and 350,000
were enrolled by state pharmacy assistance programs established by some states with
their own funds to help older people pay for prescription drugs. Thus, about 3.5
million persons enrolled in the card program through their own initiative. Data are
not available on the proportion of low-income persons who enrolled through each of
these methods.
At the urging of beneficiary organizations, CMS recently decided to facilitate
enrollment in the discount card program for beneficiaries who participate in one of
the Medicare Saving Programs (MSP).10 Because these programs, which cover
various Medicare-related out-of-pocket costs, are targeted to low-income
beneficiaries, virtually all participants would meet the income criteria for receiving
the drug card credit. In October 2004, CMS mailed drug cards to 1.1 million MSP
participants. Once these persons called 1-800-MEDICARE or the phone number of
the card sponsor to which they had been randomly assigned, enrollment would be
activated. As of January 2005, less than 10% of those who were mailed cards had
enrolled in the program.

8 U.S. Department of Health and Human Services, HHS Budget in Brief: Fiscal Year 2006,
Feb. 2005, p. 52.
9 CMS Office of Legislation, State Drug Card Statistics at a Glance, May 19, 2004.
10 Medicare Savings Programs finance certain Medicare cost-sharing expenses for three
categories of Medicare beneficiaries. Qualified Medicare Beneficiaries (QMB) have
incomes below the federal poverty level (FPL) and assets no greater than $4,000 for an
individual and $6,000 for a couple. They are entitled to have their Medicare cost-sharing
amounts and their Part B premiums paid jointly by federal and state governments through
the Medicaid program. Specified Low-Income Beneficiaries (SLMB) meet QMB criteria
except that their income is greater than 100% of the FPL but less than 120%. The Medicaid
program pays their Medicare Part B premiums. Qualifying-Individuals (QI-1) meet QMB
asset criteria but have incomes between 120% and 135% of the FPL. States receive a
capped federal allotment that pays this group’s Part B premiums until the annual allotment
has been spent. Some states allow individuals to retain additional income or assets and still
qualify for each of these three MSP categories.

This report addresses the approaches CMS has been using to inform
beneficiaries about Medicare’s covered benefits and options. But most specifically,
it focuses on education and outreach strategies adopted to both inform beneficiaries
about the prescription drug discount card program and assist them in choosing the
card that best fits their circumstances. Lessons learned from these current efforts can
help Congress oversee the design and implementation of strategies for assisting
beneficiaries to understand an even more complicated Medicare prescription drug
benefit and make informed decisions in the fall of 2005 about new private drug plans.
Evolution of Beneficiary Outreach
and Education Programs
Enactment of Medicare
The challenge of educating older people about new Medicare benefits dates back
to the program’s enactment in 1965. Then, federal officials needed to locate all 19
million persons age 65 and over to enroll them in the Medicare program.
All older people were initially covered by the hospital insurance program,
Medicare Part A. Participants in Social Security were automatically enrolled in Part
A by the Social Security Administration (SSA). But about 4.5 million older people
did not receive Social Security payments, primarily because they were retired from
federal, state, or local governments that had established separate public pension
systems for their employees. To participate in Part A, these individuals were
required to submit an application to SSA.
All older people also had the choice of enrolling in the voluntary Supplementary
Medical Insurance (SMI) program, Medicare Part B. Thus, they needed to learn
about this option and determine whether they wanted to participate.
Beneficiary Outreach. In 1965, SSA launched a massive effort to enroll all
older people in Part A and Part B of the Medicare program. With the assistance of
the Internal Revenue Service, the Federal Civil Service Commission (now the Office
of Personnel Management) and state and local governmental retirement systems,
practically all older persons who were not eligible for Social Security were identified
and eventually enrolled in Part A. Those individuals, along with all Social Security
beneficiaries, were mailed applications for Part B enrollment.
About half of the target population responded to the first mailing, most choosing
to enroll in Part B. A second mailing, a media campaign and a targeted door-to-door
$7.2 million outreach effort, “Operation Medicare Alert,” sponsored by the U.S.
Office of Economic Opportunity, achieved a Part B enrollment of 88% of the eligible
population. Congress enacted legislation to extend the Part B enrollment deadline
for two months, after which the participation rate increased to 90%. In addition,
about 1 million older persons declined Part B participation, meaning that almost all

eligible individuals proactively responded to the various outreach efforts during the
nine-month enrollment period.11
Beneficiary Enrollment. Achieving a 90% enrollment rate in the Medicare
program at its inception was a truly remarkable accomplishment. Communication
methods used today, such as national toll-free telephone lines and the Internet, were
not available. Eligible individuals without any prior connection to a federal benefit
program had to be located. And many older people who had limited exposure to
insurance terms needed to learn about premiums, deductibles, and co-payments in
order to make a decision about enrolling in Part B.
On the other hand, compared to the complex decisions individuals must make
when enrolling in the drug discount program, enrollment in Part B was a relatively
straightforward process. When beneficiaries decided whether to enroll in Medicare
Part B, their primary consideration was whether the monthly premium of $3 was
worth the program’s benefits. Only a small percentage of older people had to
compare Part B benefits with their existing insurance plan since so few had private
health care coverage for physician services and the other new Part B benefits. In
contrast, the decisions beneficiaries face in choosing a drug discount card are
complicated due in part to the number of cards available and the variation among
them in drug prices, covered drugs, and participating pharmacies.
Also because in 1965 older people had only two choices — to enroll in Part B
or not — the SSA was able to mail each person a standard application form that
asked for a simple yes-no response to be sent back to SSA. In contrast, when the
discount card program began, a low-income person who wanted to enroll in a card
and apply for the $600 credit needed to mail an application to a particular card
sponsor rather than apply through a common point. In the fall of 2004, CMS began
permitting card sponsors to accept beneficiary applications for both the card and the
credit through an online link to the sponsor’s website posted on
[] or over the phone
Current CMS efforts to educate Medicare beneficiaries about the program’s
covered services and to facilitate consumer decision-making in choosing a drug
discount card are rooted in two prior significant congressional reform initiatives.
These are (1) the creation of standardized supplemental insurance plans in 1990, and
(2) the establishment in 1997 of new types of managed care plans under the
Medicare+Choice program. Both provided new program options to beneficiaries
who often needed tailored information and decision supports in order to take
maximum advantage of the choices created by these initiatives.
Omnibus Budget Reconciliation Act of 1990: Medigap Plan
With passage of the Omnibus Budget Reconciliation Act of 1990 (P.L. 101-

518), Congress enacted reforms to restructure Medicare Supplemental Insurance,

11 National Academy of Social Insurance, Implementation Aspects of National Health Care
Reform: Reflections on Implementing Medicare, Mar. 15, 1993.

commonly known as Medigap. In response to both widespread fraudulent sales
practices and concerns that Medigap insurance policies were too complicated to
understand and difficult to compare, Congress mandated that all policies sold be
designed to conform to one of 10 standardized plans.
Section 4360 of the Act also created the Information, Counseling and Assistance
program, later renamed the State Health Insurance Assistance Program (SHIP),
funded by federal grants to states awarded by the Health Care Financing
Administration (HCFA), now CMS. Fifteen states already had similar programs upon
which the federal program was modeled. In each state, the Governor designated the
state agency to manage the program. In two-thirds of the states, state Offices on
Aging have that responsibility, and in the remaining one-third, State Insurance
Commissions administer the SHIP.
Initially SHIPs were charged with providing information, counseling and
assistance to beneficiaries in making choices about Medigap and long-term care
insurance, and more generally helping them understand their Medicare coverage,
reconcile erroneous billings and recognize fraudulent insurance practices. Over the
past 14 years, their roles have significantly expanded as subsequent legislation
created Medicare managed care options and established Medicare-endorsed drug
discount cards and a Medicare prescription drug benefit. The one-on-one counseling
and decision support provided by SHIPs has evolved to meet beneficiary needs for
information and decision support in selecting from among these new types of options.
The resources allocated to the program, however, remained relatively stable.
When it was first established, the initial level of support was $10 million for FY1991.
Over the next 12 years, annual funding levels fluctuated up and down along a band
ranging from $10 million to $16 million. With enactment of the MMA and the new
benefit choices it created, CMS increased funding for the SHIP program from $12
million in 2003 to $21 million in 2004 and $31 million in 2005 to provide a higher
level of beneficiary decision support.
Balanced Budget Act of 1997: Choice of Managed Care Plans
The second major Medicare policy change that triggered new consumer
education efforts was the creation of Medicare+Choice managed care plans coupled
with an intensified emphasis on increasing beneficiary enrollment in managed care.
When enacting these changes in the Balanced Budget Act of 1997 (BBA 97, P.L.
105-33), Congress specified a set of activities HHS was required to conduct to
educate older people about the Medicare program in general and assist them in
making choices between traditional Medicare and the new plans authorized in the
Act.12 For a variety of reasons, managed care options did not increase over the next
several years; but a broad range of efforts to help older people better understand
Medicare and choose among existing options was instituted; these remain today as
the core components of what has become known as the National Medicare Education
Program (NMEP). As discussed below, the NMEP included the SHIP as well as the
activities mandated by BBA 97.

12 Section 1851(d).

Congress established the building blocks of the NMEP out of two concerns.
First, it had heard recurring beneficiary concerns about how difficult the Medicare
program is to understand. Second, it wanted to encourage expansion of Medicare
managed care options and recognized that many beneficiaries would need extensive
information in order to elect a new form of health care delivery that was different
from the traditional system to which they had become accustomed.
BBA 97 mandated specific methods to be used by HHS for the provision of
beneficiary information to promote informed choice. These include:
!Written materials, sent annually to beneficiaries to coincide with the
open enrollment period for Medicare+Choice plans, which provide
(1) a detailed description of benefits covered under the original
Medicare fee-for-service program; (2) congressionally-specified
comparative information about Medicare+Choice plans available in
a beneficiary’s geographic area; (3) Medigap policy benefits and
requirements; and (4) procedural beneficiary rights under traditional
Medicare and Medicare+Choice;
!A toll-free telephone number to respond to beneficiary inquiries;
!An Internet site providing information on Medicare plan choices
and, specifically, on available Medicare+Choice plans; and
!A nationally coordinated educational and publicity campaign to
inform beneficiaries about Medicare+Choice plans and how to elect
These components are now taken for granted as routine ways of providing
consumer information about Medicare and are cited in the MMA as core mechanisms
for disseminating information about the private drug plans that will become available
in 2006. However, when these methods were mandated by Congress in 1997, HCFA
(now CMS) had to create entirely new information products and vehicles. Their
evolution forms the basis for current beneficiary educational efforts.
Written Materials. The Medicare and You Handbook was substantially
revised to meet the mandate for provision of comprehensive yet understandable
written materials. The new version underwent extensive testing to ensure that
information was presented in language understandable to a consumer audience. To
provide comparative information on Medicare+Choice Plans available in specific
geographic areas, in the fall of 1999, HHS published tailored versions of Medicare
and You, mailed to beneficiaries living in distinct areas.
Because this endeavor was such a complete overhaul of previous materials
provided to beneficiaries, HHS decided to test use of these materials in five pilot
states beginning in fall of 1998 before disseminating them nationwide. The pilot
states were Arizona, Florida, Ohio, Oregon, and Washington. These states were
chosen to provide a mix of places with varying degrees of managed care penetration
and a range of beneficiary demographic characteristics. In particular, Arizona and
Florida provided an opportunity to test the Spanish version of Medicare and You.
Toll-Free Number. Establishing a nationwide 800 help line number presented
a different set of challenges, related in part to limitations in the capacity of the

nation’s telecommunication infrastructure at the time. Several years previously, SSA
had introduced an 800 number that was fraught with implementation problems. SSA
underestimated the call volume it would receive; neither the telecommunication
network nor the number of service representatives hired to handle the calls could
effectively respond, leading to an angry public outcry about service failures.
Therefore, HHS was anxious to avoid a similar outcome.
Implementation of the toll-free number was piloted in the same five states that
were testing Medicare and You. Scripts were written for service representatives to
use in answering the most typically asked questions, and protocols were developed
to identify more complicated questions that should be referred to other sources, such
as Medicare contractors or the appropriate SHIP.
Eventually 1-800-MEDICARE was expanded to achieve nationwide coverage
by phasing in regions of the country on a rolling basis while HHS monitored the
line’s capacity to handle increased call volume. While access to the number was
available nationwide following the five state pilot test, nationwide publicity
announcing the number was put on hold while state and local publicity about the help
line was incrementally rolled out.
Website. In 1998, the Health Care Financing Administration (HCFA)
established a new website [] targeted to a beneficiary
audience. Its initial content included general information about the Medicare
program, detailed information about benefits and coverage under the traditional fee-
for-service program, and comparative data about Medicare+Choice plans organized
by zip code. It also included a component that provided information about various
programs designed to help older people pay for prescription drugs. These included
state pharmacy assistance programs established by some states with their own funds
to help older people pay for prescription drugs, and special assistance programs
offered by individual pharmaceutical manufacturers.
When the website was launched, beneficiary organizations voiced some of the
same concerns as those being raised today. In particular, questions were raised about
reliance on the Internet as a major vehicle for providing comparative information
about Medicare options because of the relatively low level of Internet usage by older
people in general, and particularly among the oldest and the lowest income segments
of the beneficiary population. Those concerns were somewhat offset by HCFA’s
publication of geographically tailored versions of “Medicare and You,” which
included detailed written information about Medicare+Choice plans available in
distinct areas of the country.
Nationally Coordinated Educational and Publicity Campaign. In
addition to mandating in BBA 97 the three specific activities described above,
Congress laid out a more general requirement that HHS conduct an educational and
publicity campaign in the fall of each year concurrent with the Medicare+Choice
open enrollment period. This mandate was initially implemented through the
production of television and radio public service advertisements and by health fairs
sponsored by HCFA regional office staff under the rubric of “Regional Education
About Choices in Health” (REACH). In addition, the annually updated Medicare
and You handbook was mailed to all Medicare beneficiaries in the fall of each year.

Previously, it was only sent to persons when they initially enrolled in the program or
upon request.
National Medicare Education Program. From the start, HCFA viewed
the SHIPs and all of the components established in the BBA 97 to be part of an
overall effort which it termed the National Medicare Education Program. National
organizations representing older people and persons with disabilities were solicited
by HCFA to become partners in carrying out educational efforts at the state and local
levels. Partners were generally organizations that had an existing relationship with
beneficiaries and could help educate them about Medicare as the partners carried out
their primary roles. And HCFA began describing and budgeting for education and
outreach activities under this single umbrella.
After pilot testing written materials and phasing in national operation of the toll-
free number, 1-800-MEDICARE, the NMEP was fully implemented in the fall of

1999. Since then, CMS has made incremental changes.

Changes to the operation of 1-800-MEDICARE extended the period during
which callers could talk directly to a customer service representative from the initial
8 ½ hours, Monday-Friday, to 24 hours, seven days a week. In 2001, CMS launched
a major media campaign that began paying for television ads rather than relying on
public service messages, which had limited exposure due to the time slots television
stations made available for them. CMS also developed a tool for use on its website,
[], to help beneficiaries more easily compare the features
of available Medicare+Choice plans and calculate each plan’s probable out-of-
pocket costs based on their health status and age.
To solicit stakeholders’ input on opportunities for HCFA and HHS to enhance
the federal government’s effectiveness in implementing a national Medicare
education program, HHS in 1999 established the Advisory Panel on Medicare
Education. The membership, appointed by the HHS Secretary, includes individuals
affiliated with beneficiary organizations, Medicare providers, insurers and experts in
consumer health communications.
Medicare Modernization Act of 2003:
Prescription Drug Benefit and Discount Card
The most recent set of Medicare reforms was enacted by Congress in 2003. In
creating a Medicare prescription drug benefit, as well as an interim drug discount
card, Congress recognized the need for outreach and education directed to Medicare
beneficiaries to assist them in understanding these program benefits and to make
informed choices among available options.
Congress provided detailed expectations in the MMA for education strategies
to be adopted in the fall of 2005 and in subsequent years to help beneficiaries choose
among new private drug plans. The statute mandates that information activities
carried out by CMS be similar and coordinated with the approaches mandated by
BBA 97 and specifies the comparative information about drug plans that must be

made available to beneficiaries. In addition the MMA conference agreement
emphasizes the importance of targeting outreach efforts to low-income older people.
In mandating education and outreach activities to be conducted for the
prescription drug discount card, the MMA takes a slightly different approach from
the processes laid out for the prescription drug plans. It requires use of the 1-800-
MEDICARE number to respond to inquiries and complaints about the card program,
but it does not specify additional vehicles that must be employed for outreach and
consumer decision-making support. Instead, HHS is required to “broadly
disseminate information to discount eligible individuals” about features of the card
program and provide comparative information about the endorsed cards to promote
informed choice by beneficiaries. The MMA also specifies that to “the extent
practicable, information dissemination is to be coordinated with dissemination of
educational information on other Medicare options.”13
Building on its previous efforts under the NMEP, initially created to implement
BBA 97, CMS has been conducting similar activities and starting new ones to assist
beneficiaries in accessing the drug card program. The following section lays out the
various beneficiary education strategies adopted by CMS and discusses ways their
initial implementation has evolved to respond to aspects identified as needing
National Publicity Campaign
Initially the Medicare drug card education campaign got off to a rocky start.
Soon after enactment of the MMA, CMS developed television advertisements that
were aired on the major networks, highlighting the new law. Print ads placed in
newspapers across the country carried the same message as the television ads:
Medicare is the same program as before with more benefits; people can keep their
same coverage; and beneficiaries will save on their drug expenses. Immediately the
ads generated controversy.
GAO Legal Opinions Requested. Some Members of Congress objected
to the advertisements, saying they were misleading and promotional, and did not
provide information that would help beneficiaries understand Medicare’s new
benefits. They formally requested a legal opinion from the Government
Accountability Office (GAO) to determine whether the ads were permissible under
the Consolidated Appropriations Resolution of 2003 (P.L. 108-7) which prohibits
federal agencies from using public funds for propaganda.14 Due to this controversy,
the national television network, CBS, suspended airing the ads until a decision about
their legality could be issued. Within several days, CBS reversed its decision and put
the advertisements back on the air.

13 Section 1860-31(a)(1).
14 Letter from Sens. Lautenberg, Kennedy, Kerry, Corzine, Reps. Schakowsky, Pallone,
Stark, Rangel and Jim Davis to David Walker, Comptroller General of the United States,
Feb. 5, 2004, at [].

The Administration responded that the ads were necessary because many
beneficiaries were unaware of the new benefits and the “MMA not only authorizes,
but in fact requires that we inform beneficiaries of the new benefits provided in the
GAO’s legal opinion, issued on March 10, 2004, found that the ads had notable
omissions and weaknesses. On the central point, however, GAO concluded that the
expenditure of funds for the advertisements did not violate the publicity or
propaganda prohibitions of P.L. 108-7. GAO stated that the ads’ content “does not
constitute a purely partisan message.”16
A similar controversy arose over a set of video news releases issued by CMS
and distributed to television stations across the country. Developed in a format
resembling broadcast news stories, staff of an HHS contractor served as a reporter,
interviewing HHS officials and older people about their perspectives on the new
Medicare prescription drug benefits. These releases were distributed to television
stations for their broadcast on local news programs, at the discretion of each station.
GAO conducted another review to assess the legality of a federal agency
spending public funds for this form of communication. In response to concerns
raised by GAO and some Members of Congress, CMS released examples of ways
the previous administration had used this same communication method and
contended that video news releases are a “well-established and well-understood use
of a common news and public affairs practice.”17
GAO’s legal opinion, issued on May 19, 2004, stated that the key difference
between the news videos released by the previous administration and the videos
addressing the new prescription drug benefit was that the ones produced in 2004 did
not inform viewers that the story was produced by the Administration. It concluded
that the prescription drug video news releases were “covert propaganda” because they
were government-produced or commissioned media that were “misleading as to their
origin.” Thus, GAO concluded that use of appropriated funds for the production and
distribution of the story packages violated the publicity or propaganda prohibitions
of P.L. 108-7.18 This is the same law considered in the previous GAO ruling but in
this instance, the primary issue was the manner in which the messages were
conveyed, not their content.

15 Letter from Dennis G. Smith, Acting Administrator, Centers for Medicare and Medicaid
Services, to Gary L. Kepplingter, Deputy General Counsel, Government Accountability
Office, Feb. 25, 2004.
16 U.S. General Accounting Office, Medicare Prescription Drug, Improvement and
Modernization Act of 2003 — Use of Appropriated Funds for Flyer and Printing and
Televison Advertisements, B-302504 (Mar. 10, 2004), decision available at
[]. See CRS Report RS21811, Medicare
Advertising: Current Controversies, by Kevin R. Kosar.
17 U.S. General Accounting Office, Department of Health and Human Services, Centers for
Medicare and Medicaid Services — Video News Releases, B-302710 (May 19, 2004),
decision available at [].
18 Ibid.

Publicity About the Prescription Drug Discount Card. Following these
two initial communication initiatives that addressed the MMA in general, in late
April 2004 CMS began running paid television, radio and print ads focusing
specifically on the Medicare drug discount card program, which would become
operational June 1, 2004. The ads urged beneficiaries to call Medicare’s toll-free
telephone line or access its web page to learn more about the cards’ benefits and how
to enroll in the card of their choice.
Given the detailed amount of information beneficiaries need to choose a card
and enroll, coupled with the time limitations of 30 and 60 second ads, CMS conveyed
a consistent message in these and subsequent ads. For further information, the ads
directed people to CMS’s two major information portals, [],
its consumer website, and its toll-free telephone line, 1-800-MEDICARE.
A second set of television and radio ads was launched in late summer and early
fall of 2004 using a similar message, with an added emphasis on savings
beneficiaries could achieve by enrolling in a Medicare drug discount card. A third
series of ads, with the same message was released in October 2004, coinciding with
the annual coordinated election period during which beneficiaries could change their
enrollment from the drug discount card they initially chose to a different one for
2005. The ability of beneficiaries to make that change, however, was not part of the
publicity campaign’s message. Given the relatively low beneficiary participation rate
in the card program, the message focused on encouraging more people to enroll.
Medicare Internet Website
Making beneficiaries aware of the Medicare drug discount card is just the first
challenge in facilitating their access to program benefits. The next is providing
comparative information about specific drug cards to enable older people to decide
which card to choose. Since individuals enroll in a specific card rather than in the
program generally, the $600 yearly credit toward the purchase of prescription drugs
by low-income older people only becomes available after selecting a card.
One of the primary vehicles CMS uses to inform beneficiaries about the various
Medicare-endorsed drug discount cards is its website targeted to beneficiaries,
[]. In the very short time frame between CMS’ selection
of drug card sponsors and the date established in the MMA when program
enrollment must begin, CMS posted on its website details about each
endorsed card.
Prescription Drug Assistance Program. A tool called the Prescription
Drug Assistance Program (PDAP) was developed to present information about each
card sponsor, the pharmacies included in its network, the drugs each sponsor covers
in its formulary and their prices. Thus a wide range of information has been made
available to beneficiaries to use in deciding whether to enroll in the card program and
in selecting the card that best suits their needs.
To use the PDAP, beneficiaries enter their zip codes and respond to a series of
questions that establish their eligibility to enroll in a card and to qualify for its credit.
Next they enter the drugs they use on a regular basis, their dosage and the monthly

quantity of each drug taken. The search engine produces a list of card sponsors that
cover all of their drugs along with their prices. Since some beneficiaries want to
ensure the pharmacy they typically use is included in a card sponsor’s network, the
tool enables individuals to search for a list of cards a particular pharmacy accepts.
When the PDAP was inaugurated in May 2004, it received a great deal of
attention in the press and among stakeholder organizations. Some hailed the
comprehensive scope of the data available to help consumers make informed
decisions. Others pointed to what they perceived as its limitations, such as the level
of computer skills required of users to enter the required information and to navigate
the tool’s search functions for making comparisons among cards.
The speed with which CMS was able to post such detailed data on each card
sponsor’s offering had a downside. In some cases the pharmacies listed as part of a
sponsor’s network had moved or gone out of business. Having a more serious effect
on public confidence, some drug sponsors publically stated that some of their posted
prices were too high. CMS responded that some sponsors provided to CMS a range
of prices for specific drugs and without more precise information, it posted the
maximum price cited by sponsors in their applications to become selected as a
Medicare-endorsed card sponsor. Other sponsors were not able to submit all of their
pricing information before the PDAP was launched.
As a result, initial calculations of potential savings individuals might achieve
by enrolling in a card program were lower than expected. This led CMS to advise
beneficiaries to wait a few weeks before enrolling because it expected drug costs to
drop due to both competition among sponsors and more accurate postings of the
sponsors’ prices. Within several weeks the website did reflect lower costs.
PDAP Changes. Over the following several months, CMS made changes to
the PDAP to make it easier to use. After hearing consumers’ comments on the
difficulty of reviewing PDAP search results that produced detailed information on
38 national cards and often some regional ones, CMS created an option called “Price
Compare.” When selecting this option, the search results displayed are limited to the
five cards offering the lowest price for the combination of drugs used by the
beneficiary. CMS also made it easier for consumers to enter their drug information
and improved the way drug prices are displayed so users can compare prices between
comparable generic and brand name drugs.
CMS also added information about other programs that help older people reduce
their out-of-pocket drug costs, such as state pharmaceutical assistance programs.
Usually such programs are targeted to low and moderate-income persons and may
consider assets when determining an applicant’s eligibility. To help people
determine if they might qualify for a state-specific program, the PDAP can provide
them with an immediate preliminary assessment of their eligibility by collecting both
income and asset data.
Information about two types of assistance programs offered by specific
pharmaceutical manufacturers was also included. Some of these are available to all
lower income beneficiaries through a separate application, regardless of whether they
enroll in a card. Others are available through arrangements with specific card

sponsors and provide additional benefits that “wrap around” a card’s negotiated
discounts. Often these wrap-around programs provide some of the manufacturer’s
drugs free or at a minimal cost for low income enrollees who have used their entire
$600 credit. Since individual drug manufacturers make such arrangements with
specific card sponsors, beneficiaries need to consider whether the card they choose
provides these extra benefits for the drugs they regularly use.
Finally, a recent addition to the PDAP makes several requests of beneficiaries
to enter the amount they pay for each of their prescription drugs so the tool can
calculate the total savings they will achieve by enrolling in a card program. Asking
beneficiaries to provide this information could make the enrollment process seem
more burdensome, although the first request for current price data clearly adds that
entering it is optional. The Medicare website also asks card enrollees to share with
CMS their success stories about the savings they have achieved. Through a link on
the PDAP, beneficiaries can indicate they would like to be contacted by a Medicare
representative to share their experiences.
Toll-free Telephone Help Line
As in previous beneficiary education campaigns, all CMS written materials and
media communications direct beneficiaries to its website or to its toll-free number,
1-800-MEDICARE, to obtain information about the drug discount card. Since many
older persons do not use the Internet, the Medicare help line is an alternative source
of assistance. Through eight call centers located in several states, Customer Service
Representatives (CSRs) respond to inquiries about the Medicare program, often using
written scripts that provide standardized answers to a wide range of anticipated
questions. These responses are available to CSRs on their computer desktops.
Call Volume. Besides giving general program information, help line operators
can use the same PDAP tool located on the Medicare website to provide beneficiaries
with comparative information about drug discount card options. Callers are asked
to give operators their zip codes, income information that indicates their potential
eligibility for the card’s credit, and dosage and quantity of each of the drugs they
regularly use. When this information is entered into the PDAP, it generates a list of
drug cards available in the caller’s zip code, the local pharmacies that accept each
card and prices for the caller’s regularly used drugs. These search results can be
mailed to the caller. For more intensive support in deciding which card to choose,
a caller might be referred to the appropriate SHIP, as discussed below.
When CMS began its major publicity campaign about the drug card program in
late April 2004, it conducted intensive outreach to the press. The tide of resulting
newspaper articles and televison stories about the drug discount card program, along
with CMS’s paid advertisements, generated a flood of phone calls to 1-800-
MEDICARE. In May 2004, the toll-free line received approximately 3.8 million
calls, exceeding 50% of the call volume CMS anticipated for all of 2004.19 The
result was long waiting times for people to connect with a CSR and frequent

19 U.S. Government Accountability Office, Accuracy of Responses from the 1-800-
MEDICARE Help Line Should be Improved, GAO-05-130, Dec. 8, 2004, p. 46.

disconnections. These initial experiences, widely reported in the press, likely
contributed to public perceptions that gaining access to the Medicare drug discount
card program was difficult to achieve.
CMS significantly increased the number of operators to absorb this higher call
volume. In mid-July, a total of 3,000 customer service representatives were on
board, double the number available in May. Following the spike reached in May, call
volume declined considerably through the summer and early fall; but call volume
typically follows a cyclical pattern and the number of calls received during that time
by 1-800-MEDICARE were considerably higher than comparable monthly numbers
for 2003.20
GAO Evaluation. Ensuring an adequate supply of CSRs to respond to public
inquiries is one indicator of the utility of 1-800-MEDICARE. The other is whether
once connected to a CSR, callers receive reliable information. GAO recently
evaluated the accuracy of responses provided by 1-800-MEDICARE and concluded21
that CMS needed to take steps to improve the operation of its toll-free number.
GAO placed 420 calls to 1-800-MEDICARE, each time asking one of six
predetermined questions. Three were about the prescription drug discount card; three
addressed other coverage or eligibility issues. Overall, GAO concluded that 61% of
the responses were accurate, 29% were inaccurate, and in 10% of the calls, no answer
was provided, primarily because the caller was transferred to a claims processing
contractor that was not open for business when the referral was made.
Accuracy rates for responses to each of the six questions varied considerably.
Most significant for the drug discount card program, responses to a question about
a hypothetical beneficiary’s eligibility for the $600 credit were inaccurate 79% of the
time. GAO callers represented the individual as having three specified sources and
amounts of income. The CSRs incorrectly told callers that the individual’s total
income exceeded the amount permitted to qualify for the card’s credit. Most replies
failed to consider that some sources of income are not counted when calculating
eligibility. To answer this question correctly, CSRs needed to consult a second script
listing exempted sources of income.
Another question about the prescription drug card program asked which card
would be accepted by a specific pharmacy while covering all of a beneficiary’s drugs
at the lowest cost. Help line responses were inaccurate 14% of the time, with an
additional 10% of inquiries unanswered due to technical problems. The third drug
card question asked whether a relative could receive a card if she has a Medigap
policy, which was answered incorrectly 16% of the time.

20 Ernest Muldrow and Timothy P. Walsh, Website and 1-800-MEDICARE Update, CMS,
presented at the National Medicare Education Program Partnership Alliance Meeting, Jan.

24, 2005.

21 GAO, Accuracy of Responses from the 1-800-MEDICARE Help Line Should be Improved,
p. 6.

GAO recommended that CMS revise its procedures so calls are not transferred
to contractors that are closed at the time of the call; assess current scripts and pretest
new and revised ones to ensure they are understandable; conduct more testing of the
CSRs’ ability to correctly answer questions; and monitor the accuracy rate of each
frequently asked question to identify scripts requiring modifications or additional
CSR training.
In its comments to GAO, CMS concurred with these recommendations while
providing background information on the special circumstances faced by the help line
in 2004 and a description of the steps it had already taken to correct some of the
problems GAO identified. These include changing call routing plans to ensure that
callers are sent to a general CSR when a contractor’s office is closed and revising
training protocols to better measure the operators’ ability to accurately answer
Written Beneficiary Materials
To explain the drug discount card to a variety of audiences, CMS published
multiple types of written materials. Some, such as training materials, are targeted to
those who assist older people understand the Medicare program; most, however, are
designed for beneficiaries to use themselves. In February 2004, HHS Secretary
Thompson sent beneficiaries a letter and a brochure describing the new Medicare
benefits adopted by the MMA. Another more targeted letter was sent in April 2004
by SSA Administrator Joanne Barnhart to persons with Social Security payments
below the income eligibility threshold established to qualify for the drug discount
card’s credit. This communication focused on the benefits available to low-income
persons and the process for enrolling in a card and applying for the credit.
Other new CMS publications include a guide to choosing a Medicare-endorsed
drug discount card, enrollment forms, and various brief fact sheets designed to help
people enroll in the program. All of these can be downloaded from the and websites. The 2005 edition of Medicare and You, mailed to all
beneficiaries, begins with a section on Medicare-endorsed drug discount cards, the
credit available to low-income persons, and the enrollment process.
State Health Insurance Assistance Program
State Health Insurance Assistance programs (SHIPs), funded by CMS since
1991 through grants to states, provide tailored assistance on a wide range of issues
to individual beneficiaries who need more guidance than can be provided by
informational vehicles aimed at the Medicare population at large. Given the
complexity of both the Medicare-Endorsed Prescription Drug Card program and the
Medicare Prescription Drug Plans slated to begin in 2006, the type of one-on-one
beneficiary counseling and decisions support provided by SHIPs has been seen as an
essential complement to the information provided more generally through
[] and 1-800-MEDICARE.
In February 2004, Senator Grassley and Senator Baucus wrote to HHS Secretary
Thompson urging him to ensure that when implementing the MMA, adequate

resources are provided to support beneficiary education initiatives. “We expect that
substantial additional funding be provided to State Health Insurance Assistance
programs, which offer cost-effective beneficiary education, counseling and outreach
services throughout the nation.”22 The Senators asked CMS to increase funds
allocated to SHIPs from the $12.5 million awarded in 2003 to at least $41 million
in each of 2004 and 2005, or approximately $1.00 per beneficiary per year.
Several other Senators sent a separate letter to Secretary Thompson requesting
an identical level of support.23 Since the primary source of federal funding to states
for SHIPs is the CMS program management account (and in 2004 and 2005 its MMA
implementation account), CMS has latitude in determining the level of support it
will provide, within the parameters of Congress’ total appropriation for CMS
program management.
CMS announced in March 2004 that it would increase funding for the program
to a total of $21 million for 2004 and $31.7 million in 2005. Appendix A lists the
funds awarded to each state in 2004. Despite these increases, a former CMS
administrator recently commented that SHIPs are still “tremendously under24
While SHIPs are directed and managed by states, much of their program activity
is focused in communities and carried out by volunteers. As discussed previously,
SHIPs are charged with assisting beneficiaries with problems and questions related
to Medicare generally, Medicare Advantage plans,25 Medicare supplemental policies,
long term care insurance, Medicaid and beginning last year, the Medicare-endorsed
prescription drug card program. During the past year, the programs’ resources have
been primarily devoted to helping beneficiaries navigate the prescription drug
discount program.
The SHIPs’ central role is providing beneficiaries with one-on-one assistance
in resolving their questions or problems. In its printed materials such as Medicare
and You, CMS promotes SHIPs as the place for beneficiaries to turn when they need
more individually tailored counseling than can be provided by the national
information sources. With respect to the prescription drug discount card, SHIPs
provide decision support to beneficiaries as they consider enrollment in a card
program. Specifically, SHIP volunteers use CMS’ web tool, the PDAP, to enter
beneficiaries’ prescription drug profiles and help them identify their best card

22 Letter from Sens. Grassley and Baucus to HHS Secretary Thompson, Jan. 28, 2004, at
23 Letter from Sens. Bingaman, B. Graham, Daschle, Pryor, Lautenberg, Kohl, Corzine,
Clinton, Edwards, and Schumer to HHS Secretary Thompson, Apr. 6, 2004.
24 Comments by Nancy-Ann DeParle during the Sept. 10, 2004 meeting of the Medicare
Payment Advisory Commission. Transcript available at []
25 Medicare Advantage plans, created in the MMA, replace the Medicare+Choice managed
care plans established in BBA 97.

Beneficiaries learn about SHIP services through a variety of other avenues —
programs conduct aggressive outreach efforts, sponsor community seminars on the
drug discount cards, and train other local agencies to handle the more basic types of
program inquires. Another way beneficiaries connect with SHIPs is through referrals
from 1-800-MEDICARE. If a beneficiary appears to need more guidance than the
help line can provide, operators might refer them to their SHIP. According to several
SHIP program directors, these referrals have increased, particularly when a
beneficiary needs extensive assistance in comparing drug cards and/or enrolling in
the program.
Additional Community Outreach
With the advent of the Medicare Prescription Drug Discount Card, both policy
makers and beneficiary advocacy organizations recognized that intensified
community outreach efforts would be needed to educate beneficiaries about the
complex details of this new program and the Medicare Prescription Drug Plan that
will follow. In September 2004, CMS and the Administration on Aging (AOA), both
agencies of HHS, jointly awarded a total of $3.95 million to 107 community
organizations for conducting outreach, education and drug card enrollment assistance
to Medicare beneficiaries over the following five months. Priority was given to
applicant organizations located in 30 targeted urban areas where almost 70% of all
beneficiaries eligible for the discount card credit reside.26
AOA funded another concerted effort to encourage low-income beneficiaries to
enroll before December 31, 2004, the deadline for eligible individuals to receive the
$600 card credit for 2004. Funds were awarded to the National Association of State
Units on Aging (NASUA) and the National Association of Area Agencies on Aging
(n4a) to support focused media efforts in 10 targeted media markets to raise
awareness about the December deadline. State and area agencies on aging in these
locations organized a series of community outreach events during November and
December 2004.
Privately funded outreach efforts were also undertaken during 2004 by national
organizations of beneficiaries and providers. AARP conducted the most extensive
non-governmental efforts. Among these were television and newspaper
advertisements designed to create public awareness about the drug card; various
written materials on the MMA generally, the drug card specifically, and the financial
assistance available to low income persons; and town hall sessions sponsored by
local AARP chapters. In addition, it provided funding to nine national organizations
representing low-income and minority beneficiaries in order to intensify targeted
outreach to specific populations.
The National Council on Aging (NCOA) established the Access to Benefits
Coalition (ABC), consisting of more than 90 non-profit national organizations that
have set enrollment goals for achieving the participation of low-income beneficiaries
in both the prescription drug discount card and in Medicare Prescription Drug Plans.

26 CMS and AOA through Ogilvy Public Relations Worldwide, Medicare-Approved Drug
Discount Card Outreach Campaign: Request for Proposals, July 9, 2004.

With the support of private organizations, especially pharmaceutical-related
companies and foundations, the Coalition has awarded $2 million to 53 local
coalitions, giving priority to those located in areas where a high number of lower
income Medicare beneficiaries reside. These local coalitions have been conducting
educational and outreach activities designed to enroll low-income beneficiaries in
both public and private prescription savings programs.
Also targeting low-income Medicare beneficiaries, the American Society on
Aging recruited and trained volunteers who are assisting older people to better
understand the drug discount card program and select a card that best fits their
circumstances, supported by funds from Pfizer.
A beneficiary education campaign with a longer time horizon was launched in
November 2004 by a coalition called Medicare Today, consisting of health care
provider organizations, employers, health plans, pharmaceutical manufacturers and
aging advocacy groups. Its goal is to provide Medicare beneficiaries with
information on the new prescription drug plan and other new Medicare benefits
established by the MMA. The Healthcare Leadership Council, representing health
industry leaders, is spending $5 million to finance the initiative.
National Medicare Education Program Budget
In FY2005, CMS has budgeted $340.45 million for its activities to educate
beneficiaries about Medicare’s benefits and health plan choices.27 By way of
comparison, the beneficiary education budget for FY2003, the most recent “normal
year,” was $149.6 million.28 While education and outreach efforts conducted for the
discount drug card have required special strategies and intensified use of existing
methods, beneficiary information needs about other aspects of the Medicare program
continue. For example, a routine, ongoing information activity is the annual
publication and mailing of the Medicare and You handbook to all beneficiaries.
The FY2005 beneficiary information activities are supported by four sources:
CMS Program Management Account$ 120.4 M
MMA implementation funds ($1 billion
total) authorized by the MMA for 2004 and
2005$ 191.8 M
Medicare Advantage Plan user fees
authorized by MMA to support beneficiary
information activities$ 13.0 M
Quality Improvement Organizations (QIOs)
budget for the Consumer Assessment of
Health Plans Surveys (survey of consumer
health plan experience)$ 15.25M

27 U.S. Department of Health and Human Services, CMS Justification of Estimates for
Appropriations Committees, Fiscal Year 2006.
28 U.S. Department of Health and Human Services, CMS Justification of Estimates for
Appropriations Committees, Fiscal Year 2004.

The FY2005 program budget provides the following levels of support for each
major component of the National Medicare Education Program:
Table 1. National Medicare Education Program FY2005 Budget
Program Support Services:$39.45 M
— Ad campaign
— Formative research, evaluation and consumer testing of NMEP
— Consumer Assessment of Health Plans Survey
Internet Websites:$22.7 M
— Maintenance, updates, enhancements to databases and websites
— Software licenses
1-800-MEDICARE: $181.6 M
— Call center, customer service representatives
— Print fulfillment services
Beneficiary Materials:$47.9 M
— Medicare and You handbook: printing and mailing
— Targeted materials on specific subjects
Community-based Outreach:$48.8 M
— SHIP grants
— REACH (CMS regional office outreach activities)
— Horizons (targeted outreach to minority communities)
— Grassroots coalitions
Source: HHS, CMS Justification of Estimates for Appropriations Committees, FY2006.
Factors Influencing Beneficiaries’ Response
to Outreach Efforts
CMS has implemented a wide range of education and outreach activities with
the goals of informing beneficiaries about the Medicare-Endorsed Prescription Drug
Card program, motivating them to enroll, and helping them choose among available
card options. Many public and private entities have contributed time and resources
to achieving this goal. Despite these efforts, 10 months after program enrollment
began, only 6.2 million beneficiaries are participating. Close to half of these were
automatically enrolled by either their Medicare Advantage plan or a state
pharmaceutical assistance program.

Low-income participants who meet the eligibility criteria for the card’s credit
comprise 1.7 million of the program’s enrollees as of February 2005. Using data
from the Current Population Survey and Medicare administrative files, CMS
estimated that 7 million beneficiaries would meet the eligibility criteria for receiving
the credit, more than four times the number of low-income persons currently enrolled
in the program. Of the estimated number of eligible persons, CMS projected at the
start of the program that 4.7 million would enroll. These estimates do not include
low-income Medicare beneficiaries also enrolled in Medicaid since they are
precluded from receiving a discount drug card due to their existing drug coverage.
The challenge of reaching persons with low incomes and motivating them to
participate in the drug card program is more complex than outreach efforts conducted
by other income-targeted programs. No previous education and outreach experience,
by itself, provides a complete roadmap since efforts for this program are needed to
both make low-income persons aware of its benefits and to support them in deciding
among various program options.
Identifying low-income persons who might be eligible for various income-
targeted programs such as food stamps, SSI and the Medicare Savings Programs
(MSP) has been a continuing struggle. The substantial outreach efforts targeted
toward persons potentially eligible for MSP, for example, have resulted in the
enrollment of less than two-thirds of those who could qualify. And while the
programs themselves can be somewhat complicated, individuals’ choices are to
enroll or not. No further decisions are required.
The National Medicare Education Program’s previous experience with
facilitating choice focused on helping beneficiaries decide whether to participate in
the traditional fee-for-service Medicare program or select a managed care plan. In
this situation, beneficiaries are already enrolled in a health care program. And while
the task of choosing a specific managed care plan can be more complicated than
selecting a drug discount card, the implication of making no proactive decision about
health plan options is much different — the beneficiary continues to have traditional
Medicare coverage. Failing to choose a discount drug card means that a low-income
beneficiary forgoes $1,200 in financial assistance (two annual credits of $600 each)
that would have been available to meet prescription drug expenses.
After 10 months of implementation experience, some consensus is emerging
among researchers and beneficiary organizations about aspects of both the drug card
program’s design and the mix of methods employed for beneficiary communication
that may have influenced the lower than expected level of beneficiary participation.
Some research on individual decision-making processes illustrates the type of
communication and decision-making support that may be helpful to older people.
Research on Communications and Decision-Making
Making choices among available options requires a variety of skills, such as
being able to understand comparative information, apply it to one’s own
circumstances, and disregard information not relevant to the choice at hand.
Research on literacy, health literacy, decision-making and consumer preferences for

communication vehicles highlights key factors that shape the extent to which people
can use and process information.
Health Literacy. Being able to interpret unambiguous data correctly is the29
lowest level of skill involved in using information for decision-making. Several
factors influence that ability, including a person’s literacy level, cognitive
functioning, comprehension skills, and pre-existing knowledge of the subject matter.
The most recent available national data on literacy levels is from the National Adult
Literacy Survey administered in 1992 to a representative sample of 13,600 adults age
16 and older.30 The results indicate that one-third of persons age 65 and over have
only rudimentary skills at the lowest level measured, and thus by definition have
substantial difficulty with reading, writing, communicating, comprehension, and
solving problems.
In the context of health care systems, low literacy results in low health literacy,
defined as the ability to “obtain, process and understand basic health information and31
services needed to make appropriate health decisions.” One of the most frequently
cited studies that measured health literacy among persons aged 65 and over was
conducted of 3,250 enrollees in Medicare managed care plans located in four states.
Overall, 33.9% of English-speaking respondents and 53.9% of Spanish-speaking
respondents had inadequate or marginal functional health literacy. Persons aged 85
and over had even higher rates of impaired health literacy.32
The study concluded that even after adjusting for years of school completed and
cognitive impairment, reading ability declines dramatically with age. To compensate
for this decline, the authors recommend that health care organizations use multiple
forms of health communication, particularly audiotapes, videotape recorders and
visual cues rather than relying exclusively on written instructions.
Another study conducted under an agreement with AARP and CMS reached a
similar conclusion: that age-related declines in information processing, cognitive
ability (for non-demented elderly) and comprehension limit the capacity of older33
people to accurately interpret and use comparative information. In this study, 56%
of beneficiaries had trouble with basic comprehension of Medicare information, the
precursor skill required to apply comparative information to one’s own circumstances
for decision-making. Further, those with low comprehension skills view having
more information and options to choose from to be a burden. This group generally
expressed an interest in having someone help them make choices, but are no more
likely than others to seek decision-making assistance.

29 Hibbard, Older Consumers’ Skill.
30 The survey was administered again in 2003, but results are not yet available.
31 U.S. Department of Health and Human Services, Healthy People 2010, Nov. 2000, vol.

1, pp. 11-20.

32 Julie A. Gazmararian et al., “Health Literacy Among Medicare Enrollees in a Managed
Care Organization,” JAMA, vol. 281, no. 6 (Feb. 10, 1999), pp. 545-551.
33 Hibbard, Older Consumers’ Skill.

The field of psychological economics has researched decision-making within
the context of consumer marketing. The conclusions of some studies are strikingly
applicable to the drug discount card experience, suggesting that information overload
can be dysfunctional and can frequently lead to making no decision at all. Or it can
lead to making decisions toward the mean, where the inability to sort relevant
information leads to discarding the outliers — even the best choices.34
The common theme of all of this research is to simplify available options so
people will be able to make better decisions. Hibbard, in particular, has applied
decision-making theory to the behavior of Medicare beneficiaries and suggests that
if beneficiaries have difficulty understanding program information and/or are
overwhelmed their choices, several outcomes are likely. Some beneficiaries will
simply not make a choice. Others will make a choice, but take short cuts in decision-
making that fail to address all of the important aspects. And many will make
decisions in response to emotion laden advertising messages.35
To assist beneficiaries in their decision-making, she proposes strategies such as
breaking down the process into smaller steps, formatting and highlighting key
information to draw attention to important factors, narrowing options, and identifying
those who have marginal or inadequate literacy who need one-on-one help. From a
long range policy prospective, she suggests that the best solutions would be
simplifying options by standardizing benefit designs and offering a reasonable default
Communication Vehicles Preferred by Older People. Research on
ways beneficiaries prefer to receive information about Medicare consistently
concludes that most prefer one-on-one assistance. The Medicare Current Beneficiary
Survey in 2000 asked closed ended questions to learn their preferred vehicles for
keeping up with Medicare program changes. The results for white non-Hispanic
beneficiaries were that:36
!37% prefer to talk face-to-face with someone;
!25% want to read a brochure or a pamphlet;
!15% prefer to talk on the phone;
!9% prefer mass media (televison, radio, newspapers, magazines);
!1% prefer the Internet; and
!9% do not want or need information.
Results for black and Hispanic respondents were similar, except that a higher
proportion (54%) of black beneficiaries preferred to receive Medicare information

34 George Loewenstein, “Is Choice Always Better?,” presented at the 11th Annual
Conference of the National Academy of Social Insurance, Jan. 27-28, 1999.
35 Judith Hibbard, “Beneficiary Decision-Making and the New Prescription Drug Benefit,”
presented at the 17th Annual Conference of the National Academy of Social Insurance, Jan.

28, 2005.

36 Data from the 2000 Medicare Current Beneficiary Survey reported in Program
Information on Medicare, Medicaid, SCHIP and other Programs of the Centers for
Medicare and Medicaid Services, June 2002, CMS, Section III, B. 7, p. 7.

by talking face-to-face with someone and a smaller proportion (15%) preferred to
read a pamphlet.
A recent poll conducted by the Kaiser Family Foundation asked a slightly
different closed ended question about consumers’ preferred vehicles for receiving
program information. The percentage of respondents that preferred each option are
listed below.37
!37% mailings
!25% in-person contact
!18% telephone hotlines
!8% the Internet
!13% don’t know
In reviewing implementation of the drug discount program, several researchers
have suggested that due to the complex information beneficiaries must process in
deciding whether to enroll in a drug card program and then selecting one, additional
counseling supports should be made available. In this context, increased funding for
the SHIP is frequently mentioned.38 39
On the other end of the preference scale, numerous studies indicate that for the
current older population, the Internet may not be the best vehicle for communicating
program information. One study on Internet usage by older people show that only
22% of people age 65 have ever gone online to seek information or to communicate
by e-mail.40 Another study of Medicare beneficiaries of all ages found that 31% had
ever used the Internet.41
That same study asked beneficiaries whether they had heard of
Thirteen percent said they had and 3% of respondents had visited the site. Use and
awareness of 1-800-MEDICARE fared somewhat better, with 42% being aware of
the number, but only 13% having actually used the help line.42
Influence of Discount Card Design Features on Enrollment
Educating beneficiaries about the Medicare Prescription Drug Discount Card
program was a major challenge for CMS. Besides the difficulties generally faced by

37 Henry K. Kaiser Family Foundation, Kaiser Family Foundation Health Poll Report
Survey: Selected Findings on the Medicare Drug Law, Jan. 2005.
38 Health Policy Alternatives, Inc., Medicare Drug Discount Cards: A Work in Progress,
July 2004.
39 Jack Hoadly, State Lessons on the Drug Card, presentation to the Medicare Payment
Advisory Commission, Sept. 10, 2004. Transcript available at []
40 Susannah Fox, Older Americans and the Internet, Pew Internet and American Life
Project, Mar. 25, 2004.
41 Henry K. Kaiser Family Foundation.
42 Ibid.

agencies implementing a new program, some design features of the program itself
influenced beneficiary participation.
First, the large number of cards from which beneficiaries could choose and the
variation among them in drug prices and participating pharmacies meant that no one
simple message could satisfy all of the information needed by beneficiaries to assess
their own situation. Many researchers and constituency representatives have
commented that the large number of cards from which to choose meant that many
beneficiaries made no decision.
Second, the initial release of information about the program was confusing, with
inaccurate information posted on the web and long waits to talk to an operator on the
1-800-MEDICARE line. Extensively covered by the press, these initial glitches led
to the public perception that accessing the drug card program was problematic. CMS
made major strides in overcoming these initial difficulties, but the negative
impressions lingered.
Third, some questions initially arose about the card’s financial value, fueled in
part by the early inaccurate web postings of prescription drug prices available through
the cards. Within several weeks of the initial postings, the prices listed for many of
the cards were lowered, in part due to more precise information provided to CMS by
the card sponsors. Subsequent studies have documented that the cards have provided
savings on drug costs for many beneficiaries. According to several studies of
beneficiaries’ opinions about the drug card program, uncertainty about the cards’
potential benefits was a major factor in dampening program enrollment.43 44
Fourth, drug card enrollment procedures for most of 2004 were cumbersome
and may have discouraged some beneficiaries who began the process from
completing it. Persons seeking to both enroll in a card and apply for transitional
assistance needed to mail a signed application to the address of their selected card
sponsor. And while CMS did post standardized enrollment and application forms on, some have reported that initially the forms were posted in a location
that was hard for beneficiaries to find. As a result, they had to call the sponsor’s 800
telephone number to obtain applications. So enrolling in a card required
beneficiaries to initiate several actions, all points at which beneficiaries could fall out
of the process.
Based on input from beneficiary organizations, CMS has taken several steps to
streamline the application process. First, it placed the application materials in a more
prominent location on its website. Second, it allowed people to enroll in a card and
apply for transitional assistance both over the phone and online through a link from to a card sponsor’s website. Thus, in one step people can research their
options and immediately enroll instead of making two separate contacts. And third,
in December 2004 CMS began permitting family members and unrelated helpers to
file drug card applications online or over the phone on behalf a beneficiary.

43 Ibid.
44 AARP, Filling the Rx: An Analysis of the Perceptions and Attitudes of Medicare Rx
Discount Card Holders, Dec. 2004.

According to beneficiary organizations, this latter change resulted in a surge of
completed applications that were previously half finished.
Looking toward the future, beneficiaries will face even more complicated
choices. Making a decision about whether to enroll in a Medicare prescription drug
plan carries much higher stakes than did enrollment in the card program.
For low-income beneficiaries, the drug plan benefit is larger and the penalty for
inaction can be greater. If they delay making an enrollment decision, beneficiaries
could be levied a penalty. And choosing a drug plan best suited to their needs will
be more important than selecting the best drug card. With the drug card, low-income
persons could receive $600 of assistance with drug costs for each of two years
regardless of whether they chose the card offering the best discounts for the drugs
they regularly use. For the new prescription drug benefit, it will be essential that the
plan chosen covers the prescriptions a beneficiary needs because the benefit will be
payment for drugs included in a plan’s formulary — not general assistance toward
the purchase of all drugs.
CMS has contracted with Abt Associates to evaluate the beneficiary impact of
the prescription drug discount card. Data have been collected through a survey of
card program enrollees and focus groups of enrollees and non-enrollees. Topics
addressed by the evaluation include beneficiary information and decision-making,
satisfaction with the cards, understanding of the program, transitional assistance, and
prescription purchases and savings. The final report is due in April 2005 and is to
be one of the sources CMS will use to further inform its outreach and education
efforts for the new prescription drug benefit.
Also, CMS routinely conducts formative research to develop communication
strategies and messages, as well as evaluations of its information and education
efforts. These research results are being used to shape approaches to outreach for the
prescription drug benefit. For example, based on its assessment of the drug card
experience, CMS has said its information strategy for the new benefit will make less
use of television advertisements since it found such ads are generally not successful
in raising program awareness among beneficiaries. Additional emphasis will be
placed on grassroots outreach by community organizations trusted by beneficiaries.
While CMS’ formative and evaluative research is conducted on a continuous
basis, few results have been publicly released following the initial evaluations of
activities conducted to implement the BBA 97. At a recent meeting of the Advisory
Panel on Medicare Education, CMS said it would soon make available the results of
its internal research. This information will add to Congress’ knowledge of how CMS
evaluates its efforts and makes modifications based on its findings.
The experience of the discount drug card program coupled with research on
consumer decision-making indicates that CMS’ current approach of using multiple
communication channels is needed to respond to differing characteristics of the

beneficiary population. This experience also seems to indicate that for the upcoming
prescription drug benefit, a greater emphasis may be needed on providing
beneficiaries with tailored information and consultation that will enable them to act
upon what will certainly be a more complex set of choices.

Appendix A. FY2004 Total SHIP Grant Awards
(through July 2004)
St at e Aw ard St at e Aw ard
Alabama $370,692 Ne br as ka $253,062
Alaska$116,823New Hampshire$148,557
Arizona$316,372New Jersey$498,015
Arkansas$392,423New Mexico$200,651
California$1,396,364New York$1,055,084
Colorado$245,397North Carolina$556,597
Connecticut$272,594North Dakota$172,168
De l a w a r e $128,505 Ohio $693,039
District of Columbia$116,811Oklahoma$334,182
F l orida $1,316,875 Oregon $263,705
Ge orgia $461,036 P e nnsylvania $957,268
Hawaii$144,306Rhode Island$159,983
Idaho$215,084South Carolina$306,266
Illinois$615,840South Dakota$193,220
Indi ana $381,132 Tennessee $434,384
Iow a $426,233 Te xa s $892,620
Kans as $288,280 Ut ah $158,157
K e nt ucky $488,377 Vermont $173,096
Louisiana $300,084 Vi rginia $395,465
Maine $212,703 Washi ngt o n $337,147
Maryland$313,348West Virginia$347,803
Massachusetts $442,956 Wisconsin $379,569
Michigan $559,964 Wyoming $143,376
Minnesota$344,697Puerto Rico$257,984
Mississippi$441,203Virgin Islands$33,083
Missouri $402,907 Gua m $32,423
Tot a l $20,462,501
Source: Centers for Medicare and Medicaid Services.