Pitfalls No Surprise in Drug Benefit Launch

The new Medicare prescription drug program was supposed to start humming almost with the flick of a switch. As the Bush administration envisioned it, beginning Jan. 1, millions of Medicare beneficiaries would be able to go to their pharmacists and get hefty discounts on their prescriptions.

But in the opening days, when druggists tried to enter customers names into the computerized verification system, what they got was an ominous message: “host down” -- cyber talk for system overloaded, unable to respond. Computer system operators were still frantically uploading the names and other information on tens of thousands of Medicare recipients. Three weeks later, Medicare is still catching up, although top officials say the situation is improving every day.

Creation of the Medicare prescription benefit, the biggest expansion of the healthcare program for the elderly in decades, was to be the crown jewel of the administration’s domestic record -- the first large-scale test of its theory that the best way to deliver social services such as healthcare is through the private sector. And prior to Jan. 1, administration officials confidently predicted that concerns about the complex program would soon evaporate -- like the misplaced Y2K fears of a global computer crash.

With so much riding on the new program, and with the government’s best healthcare experts having had two years to get ready, how could the launch have stumbled so badly?

How did it happen that crucial computer databases were not ready, and that when they did become available, were found to be shot through with errors? Why were telephone help lines understaffed? Why was the system plunged into such confusion and uncertainty that hundreds of thousands of elderly Medicare recipients were in danger of not getting needed medications?

And why was the response from Washington and its private partners in the medical insurance industry so faltering that governors of more than 20 states, including California, felt compelled to step in and guarantee payments so that prescriptions could be filled?

The answers have a familiar ring. Senior administration officials brushed aside advance warnings about many of the problems that materialized when the plan went into effect, critics in both political parties say. In preparing for the launch, they made their plans on the basis of assumptions that things would go relatively smoothly. And high-ranking officials were so committed to their vision that they resisted suggestions to modify the details of their strategy.

“We pointed out all of the predictable problems, and they have been realized,” Sen. Gordon H. Smith (R-Ore.), chairman of the Senate Special Committee on Aging, said last week.

“The administration had a lot of pride of ownership in the initial legislation,” Smith added, and anyone who suggested changes “was persona non grata.”

But Congress -- which approved the legislation largely along party lines -- also shares in the blame.

For example, the Jan. 1 switch in drug coverage for about 6 million low-income seniors and disabled people from Medicaid to Medicare was written into the legislation. The one-day changeover is now widely acknowledged to be the biggest source of problems. There were repeated warnings against trying to handle such a big transition so quickly. Several recommendations were put forward by experts in and out of government for alternative approaches to slow it down or provide a stronger safety net. But the one-day switch remained fixed in the design.

Congress was deeply involved in other provisions as well. Medicare Administrator Mark McClellan, for example, said the law allowed Medicare beneficiaries to sign up for a plan up to the last day of a month and get service the first day of the following month. That caused big problems at the launch.

Last year, when seniors seemed reluctant to sign up for the new benefit, administration officials repeatedly predicted that doubts would melt away and enrollments would surge in late December. When that happened, and thousands of seniors signed up with the myriad private insurance plans offering coverage -- or changed plans when they spotted what looked like a better deal -- there was not enough time to process the paperwork in time for the Jan. 1 start-up.

“This is a real concern,” McClellan said in an interview. “We are looking at what we can do to address that.” Otherwise, it could perpetuate the snags, officials say. The agency is considering whether it can issue a regulation to change the enrollment rules, or whether Congress must act.

There were also problems with the private insurance companies that, in accordance with the administration’s philosophy, were charged with creating and operating the drug plans that Medicare beneficiaries use.

For one thing, there were dozens of plans on offer, each with its own list of covered drugs and its own prices. For individual recipients, finding the best plan was complicated. That increased the likelihood of last-minute decisions and plan changes.

Moreover, there were apparently cultural clashes between Medicare, with its mandate to deliver services, and some of the private drug plans, with their concern for keeping costs in check.

Government officials discovered that some companies were not abiding by rules they had agreed to follow. For example, some plans failed to honor a requirement to provide transitional coverage of drugs not on their approved list. Medicare sent out an urgent notice insisting the transition policy be followed.

“It is critical that transition policies operate in a manner that ensures enrolled beneficiaries get their needed first prescriptions filled,” Medicare official Gary Bailey wrote in a Jan. 6 memo. There “are reports that plans are inappropriately denying some prescriptions because the plan has not provided transition override instructions to pharmacists.”

But many psychiatric patients previously covered through Medicaid were unable to get their regular medications.

“The difficulty of transitioning from Medicaid to Medicare ... is having a major impact on our patients with severe and persistent mental illnesses,” said Dr. Steven S. Sharfstein, president of the American Psychiatric Assn. “Relapse, rehospitalization, and disruption of essential treatment are some of the consequences of this bureaucratic nightmare.”

Top agency officials put too much confidence in the private drug plans, said Rep. Pete Stark (D-Fremont), the ranking Democrat on the House committee that oversees Medicare. “It’s beyond blind faith.”

For pharmacists in California, it was the computer logjam that provided the first sign of trouble. Because recipients were permitted to sign up or change coverage at the last minute, planners realized some senior citizens would seek prescriptions before their insurance companies would be able to send them membership cards. The special computer system was created specifically to deal with that. Pharmacists could plug in and verify eligibility.

But when they tried it, the system failed to respond.

“For the first two or three days, it said ‘host down,’ overloaded, couldn’t handle transactions,” said pharmacy owner Bob Graul, president of the California Pharmacists Assn. political action committee.

The network is operated for Medicare by Per-Se Technologies, based in Atlanta. A spokesman said the company was still trying to upload the December enrollment information when the avalanche of pharmacy queries hit on Jan. 1.

“There was an overwhelming number of enrollments into the end of 2005,” said Robert Borchert. Many were low-income beneficiaries whose drug needs had previously been met by Medicaid. Under the new program, all were automatically switched into private plans. Many switched insurers after finding their medicines weren’t covered by the plan that Medicare had randomly assigned them to.

The company said it quickly added computing capacity and switched its enrollment updates to off-hours.

But then another problem emerged: Much of the information in the electronic files was inaccurate or incomplete.

“The transaction would confirm eligibility, but wouldn’t give any other information on co-pays [or] what company to bill,” Graul said.

Such errors should be expected when trying to combine electronic information from different sources, said Michael Negrete, vice president of clinical affairs for the California pharmacy group. “All this information should have been tested for a month before we went live,” he said.

Lacking electronic access to accurate billing information, pharmacists and patients were forced to hit the phones. That quickly overwhelmed call centers set up by Medicare and the drug plans.

Medicare “did not have the capacity to handle the phones,” said John Rother, policy director for AARP. “They were slow in setting up a special call-in line for pharmacists.”

“It was too much, too quickly,” said Stan Rosenstein, California’s deputy director of medical services. Health and Human Services Secretary Mike Leavitt said much progress had been made to fix the problems but that some glitches would persist until every beneficiary had used their drug card at least once.

“There is a spotlight on this now,” Leavitt said. “The vast majority of people using the benefit have not had a problem. For the people who have had a problem, it is a big problem. We are working it one person at a time, one pharmacy at a time.”

Indeed, many seniors report that things went fairly smoothly. Those who signed up early and who had computer skills to help them find the right plan apparently encountered few problems.

“The entire fiasco is being blamed on one side, but I cannot see the government being responsible for all of this bug -- seniors were not doing their part,” said Robert Mills, a retired heating and air conditioning technician from Redding.

Mills, 66, had no previous drug coverage and is now in a plan that costs him $11.25 a month. Comfortable with computers, he has been helping friends find drug plans.

“It coughed a bit, but for the mass project they had to do, you’d better pat [Medicare] on the back, because they did pretty good,” Mills said.

If such positive reactions have been drowned out by complaints, that’s because the rate of problems has been so high. As late as Thursday, McClellan said the accuracy of computerized information on beneficiaries was 80%. With millions enrolled, that guaranteed that hundreds of thousands would have problems.