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Regulation and Compliance > State Regulation

HHS Acknowledges Drug Program Start-Up Problems

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The federal government has agreed to reimburse at least 20 states that have been providing emergency medicines for low-income seniors and disabled people who could not get help from the new Medicare Part D system.

The prescription drug insurance program was supposed to be up and running by Jan. 1, but states have stepped in because an estimated 10% to 20% of eligible beneficiaries were unable to get medicines through the program.

Some beneficiaries failed to show up in pharmacists’ computers as being enrolled in a plan. On other occasions, beneficiaries were charged fees for their medicine that far exceeded what they were supposed to pay, state officials say.

“These states need to be reimbursed for costs that they have put out on behalf of the plans,” U.S. Health and Human Services Secretary Mike Leavitt said earlier this week.

HHS is not yet saying how much it will spend to reimburse the states, but officials say they expect private plans to cover the majority of the reimbursement costs.

The HHS reimbursement plan calls for the federal government to help states collect from the drug plans that were supposed to be taking care of low-income beneficiaries.

Washington also will cover the states’ administrative costs plus any difference between what pharmacies charged the states and rates the drug plans pay to pharmacies.

Lawmakers have introduced a bill that would require that states be reimbursed for picking up the tab for Medicare beneficiaries, but Mark McClellan, administrator of the Centers for Medicare and Medicaid, says no congressional action is needed to authorize the reimbursement program. He says he expects most states to shut down their emergency assistance efforts by Feb. 15.

“We will ensure the plans reimburse the states and pay for any difference,” McClellan says.

Leavitt threatened to have investigators probe private drug plans that fail to deliver services required by their contracts with the government, such as providing transitional supplies of medications they would not normally cover.

Some members of Congress have criticized the plan unveiled by Leavitt and McClellan.

“This is no solution — it is simply more red tape from the Bush administration,” says Sen. Frank Lautenberg, D-N.J. “If anything, today’s announcement only makes the problem worse.”

States have had to step in and spend millions to prevent the Medicare system from collapsing at the beginning of this year, Lautenberg says.

“Now,” Lautenberg says, “the federal government wants the states to act as its bill collectors. The burden on the states keeps growing, when the federal government should just do its job and pay back the states immediately.”

Pennsylvania Gov. Edward Rendell, a Democrat, says his state is reviewing the Leavitt-McClellan program, and the state is “hopeful that the federal government will reimburse states immediately and then, where appropriate recoup costs from Medicare Part D providers.”

Lawmakers have been hearing from trade groups affected by the Medicare Part D problems as well as from state officials and consumer advocacy groups.

One trade group, the National Community Pharmacists Association, Alexandria, Va., says community pharmacists are facing a cash flow crisis as a result of the Part D start-up problems.


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