How the Centers for Medicare and Medicaid Services launched the biggest program in its history.

How the Centers for Medicare and Medicaid Services launched the biggest program in its history.

In late 2003, Mary Jane Jones got a call from the Health and Human Services Department asking if she would appear onstage next to President Bush as he signed the Medicare Modernization Act on Dec. 8 that year. At 69, she was exactly the kind of person likely to benefit from the law, which created prescription drug insurance for more than 42 million senior and disabled Medicare beneficiaries. She paid $569 a month for medication to control her diabetes and blood pressure and received only $760 a month in Social Security. To help cover the difference, she worked part time as a bookkeeper and activities planner at senior centers near her rural Midlothian, Va., home. Her financial situation was so bad that one of her sons was putting her extra expenses on his credit card. "I knew if everything the president said was true, I could stop working," she says. She soon quit her job.

Six months after her appearance at the bill-signing ceremony, seniors began using their discount drug cards. Jones wondered where hers was. She called her contact at HHS. "I asked him, 'Am I signed up?' I thought it was automatic, but it wasn't. You had to sign up yourself. He said, 'I'll do it. Don't you worry about it; I'll take care of you.' " And he did. (That official, Michael Reilly, who is now associate deputy secretary at HHS, says he called 1-800-Medicare for her and put her on the phone.)

In the early stages of the program, Jones wasn't the only senior who was confused: A January 2006 survey by the Retired Enlisted Association's Senior Citizens League, a senior advocacy group in Alexandria, Va., found that confusion about how to sign up was preventing seniors from registering.

Jones knows she got special treatment. She had the direct line and cell phone number for a senior HHS official; most seniors rely on the Internet, local resources, or 1-800-Medicare. The Government Accountability Office says the help line gives accurate answers about 34 percent of the time (GAO-06-710).

Officials at the Centers for Medicare and Medicaid Services, the agency in HHS that runs the program, attribute that early befuddlement to startup pain. The prescription drug benefit wasn't just any new program. It was the largest change to Medicare since its inception in 1965 and launched a kind of insurance that previously didn't exist-stand-alone coverage for prescription drugs.

In addition, it sought to serve more than 40 million Americans, many of whom were low-income and elderly, making them hard to reach.

The launch of the drug program poses the same challenges as President Franklin Roosevelt's New Deal, which created hundreds of new government programs during the Great Depression, and President Lyndon Johnson's vision for the Great Society, which spawned food stamps and Head Start, as well as Medicare.

Getting a new benefit off the ground requires vision, commitment from Congress and partnership with groups outside government. Federal employees look to their leaders for inspiration through long nights and weekends. Agency leaders have to be strong enough to accept and benefit from criticism. And perhaps most of all, leaders and staff must believe that what they're doing will help people.


Leslie Norwalk, CMS deputy administrator, watched as President Bush signed the prescription drug bill in December 2003. She felt overwhelmed by the task ahead. "I was the only one there thinking, 'We have so much to do,' " she says.

Her job was made somewhat easier by the fact that she and the former CMS administrator, Thomas Scully, worked closely with Congress as the legislation was being drafted. They haggled over the details for four months.

Exactly one week after President Bush signed the act, Scully resigned to work in the private sector. That left Norwalk largely in charge during the bill's first few months.

Norwalk worked backward to develop a timetable. First, CMS needed to draft regulations to explain how the new program, called Medicare Part D, would work. Agency officials had to figure out how to get beneficiaries signed up, how private insurers were going to be monitored and how to protect people against fraud. CMS also needed to budget time to market and explain the program to beneficiaries before open enrollment began on Nov. 15, 2005. The legislation required the prescription drug insurance to begin Jan. 1, 2006.

"There were a lot of questions about how and even whether this was going to work," says physician and health economist Mark McClellan, who became CMS administrator in March 2004 and announced his resignation this September.

Enlisting Support

In early 2004, no one knew whether insurers would want to participate in the program. Stand-alone prescription drug coverage had never existed before; prescription coverage usually is included in health insurance plans.

To enlist support, CMS officials reached out to industry groups and potential insurers by making conference calls, circulating draft regulations and holding one-on-one meetings. "We spent a couple months on the phone talking to everybody and their brother trying to [understand] the business decisions that companies would make depending on what we did," Norwalk recalls.

Meanwhile, insurance companies were designing the new insurance. Jacqueline Kosecoff, chief executive of Ovations Pharmacy Solutions, which is a division of the Minneapolis-based UnitedHealth Group, says insurers had to create a network with pharmacies, determine pricing and rebates, and design new systems to administer the plans. They still had no idea what to expect when the program launched a year later. "We didn't know if we'd be the only act in town, or one of lots and lots," says Kosecoff. She also wasn't sure how many people would sign up.

On Jan. 28, 2005, 14 months after the act was signed, CMS released its final regulations. The 393 pages incorporated hundreds of comments. Less than 10 months later, beneficiaries would begin signing up.

Helping Hands

In April 2005, one-third of seniors surveyed by the nonprofit Kaiser Family Foundation in Washington had an unfavorable impression of the drug benefit. Only 21 percent had a favorable one. CMS needed help.

Kathleen Harrington, head of CMS external affairs, knew the best way to explain the program to seniors was through one-on-one conversations, and she knew the 5,000 employees at CMS couldn't do that alone. "We're not designed to deliver [directly] to the beneficiary," she says, so she started meeting with organizations that are. The Housing and Urban Development Department trained its counselors to ask people about the prescription drug benefit when they were assisting those seeking low-income housing. The Treasury Department distributed information as part of their outreach on retirement issues. The State Health Insurance Assistance Program, which is funded through federal grants, counseled some 2.5 million beneficiaries about the drug program. AARP, a nonprofit organization with more than 35 million members over age 50, explained Part D on its Web site and in its 53 offices across the country. Eventually, 50,000 groups signed on to assist with outreach.

Harrington targeted Asian Americans, Hispanic Americans and African-Americans through specialized campaigns involving radio ads, local newspapers and celebrities, from Labor Secretary Elaine Chao to Bill Cosby. "It was all about sitting down and saying, 'We haven't worked together much, but we share the same goals. Let's use Part D as the beginning of closing the health disparities gap that's persisted for too long in this country,' " says Harrington.

An ad in People magazine around Valentine's Day in 2005 encouraged baby boomers to talk with their elderly parents about the new drug benefit. "We wanted to be in people's kitchens when they're sitting around talking," says Harrington.

Meanwhile, pharmacies and insurers, which had a financial stake in the success of Part D, were launching their own campaigns. Walgreens offered free one-on-one consultations. UnitedHealth published more than 10 million copies of its "Show Me" guide in seven languages. Horizon Blue Cross Blue Shield of New Jersey blanketed the area with direct mailings and rented local theaters for education sessions.

The outreach had to overcome inherently confusing subjects, such as the so-called "doughnut hole." The legislation contained a coverage gap, which means that beneficiaries pay all their own drug costs between $2,250 and $5,100, in order to keep the cost of the program under $400 billion over five years. Also confusing was beneficiaries had to choose among dozens of plans. They had to weigh which drugs they were taking or might take in the future, and which were covered by other insurance, in order to maximize savings. The Medicare Web site offered a high-tech "plan finder" that enabled Web-savvy beneficiaries-or their children-to match up with the best plan for them. Many seniors, however, didn't know how to use it.

In the summer of 2005, when insurers began submitting their plans for CMS review, officials were happy to find that their fear of low participation was unfounded. According to Avalere Health, a Washington consultancy, insurers came up with more than 40 different plan types offering a wide range of coverage.


Beneficiaries began signing up Nov. 15, 2005. CMS automatically enrolled those who qualified for Medicaid by randomly assigning them to plans.

That led to some confusion over who was in which plan, especially when some people tried to switch. Pharmacists and beneficiaries faced long waits when they called 1-800-Medicare and insurers' help lines, and some people didn't get the prescriptions they needed.

Keitha Lackey, sales director at Horizon Blue Cross Blue Shield of New Jersey, says CMS records did not include all those who were enrolled in her company's plan, so Horizon absorbed the cost and waited for CMS to update its records and send reimbursements.

"Any program this big, there's going to be some issues that come up that are hard to anticipate fully. The management challenge is to know that those things are going to happen [and] to have systems in place to deal with them quickly and effectively," says McClellan. Some problems continue: In August, more than 230,000 beneficiaries accidentally received refund checks. CMS asked them to return the nearly $50 million sent in error.

A Kaiser Family Foundation survey released in September showed that more than 90 percent of pharmacists and doctors believe the law is too complicated and that most have seen problems with the program. Eight of 10 pharmacists, for example, said customers have had problems getting their prescriptions. Almost 60 percent said they've had customers pay for drugs out of pocket because of difficulty verifying their enrollment. Still, most pharmacists and doctors believed the insurance was helping patients save money on medications.

Introverts Need Not Apply

In the midst of the high-stress period in early 2006, some CMS employees were working 70-hour weeks that included weekends. McClellan exchanged e-mails with his staff well into the night. Several high-level employees quit. At the same time, many were experiencing the high point of their careers.

"Managing this grass-roots program is going to take different skills than we've had in the past-a different kind of energy, a different personality," says Harrington. Introverts might not like the new CMS, but Harrington says she's met plenty of employees who are happy to get out from behind their desks.

"This is, I think, going to be really a lasting change in how this agency operates because we've seen that we can make the programs work better with these close connections," says McClellan. He also hopes talented young people in the health care industry see CMS as a great place to work for part of their careers.

By June 2006, 38.2 million people-90 percent of those eligible-had signed up for Part D. Three and a half million prescriptions were being filled under the program every day. CMS reported that beneficiaries were saving an average of $1,100 a year.

In late July 2006, the Kaiser Family Foundation released a survey showing that eight of 10 seniors enrolled in Part D were satisfied.

Says Norwalk, "How can you not be excited? If you can find the time to take a step back and look at all we've done in two years, phew. It's quite remarkable."

'I Don't Have to Beg'

Back in Midlothian, Jones simmers green beans for dinner. Now 72, she recently had a stroke that caused a temporary loss of sight in her left eye. She has only $5 co-pays for most of her prescription drugs now and says she'd be in the poorhouse, instead of her low-income apartment complex, without the drug benefit.

It doesn't cover everything, though. Her doctor wanted her to take anti-anxiety medicine after her stroke, but tranquilizers are excluded from coverage. Instead of the brand her doctor recommended, she buys a generic for $11. Jones is frustrated by the 30-day cap on the quantity of drugs; it means weekly trips to the pharmacy for her multiple prescriptions.

But she's not complaining. The benefit, she says, "has been wonderful for me. I can live on my own income. I don't have to beg my sons for money." She spends her days playing bingo, going to Bible study and helping her neighbors-who don't get personal help from senior administration officials-sign up for the program.

NEXT STORY: Watch This!