CMS Should Improve Oversight for the Transfer of True Out-of-Pocket Costs Between Part D Plans

Medicare sponsors did not always transfer true out-of-pocket (TrOOP) costs in accordance with Federal requirements. TrOOP costs are prescription drug costs paid by enrollees, or by specified third parties on the enrollees' behalf, that count toward the Part D annual out-of-pocket threshold that enrollees must meet before their catastrophic drug coverage begins. Sponsors are responsible for tracking and transferring enrollees' TrOOP costs as enrollees change plans throughout the coverage year. The TrOOP facilitator is a CMS contractor that assists sponsors with the transfer of TrOOP-related data if an enrollee changes plans during the coverage year. Effective January 1, 2009, sponsors must use the Financial Information Reporting (FIR) system to transfer TrOOP balances and gross covered drug costs whenever an enrollee makes an enrollment change during the coverage year. Part D requires that for every prescription filled, sponsors must submit an electronic summary record, called the prescription drug event (PDE), to CMS. The PDE record contains prescription drug cost and payment data.

For 24 of the 100 enrollees we reviewed in a stratified random sample, sponsors transferred TrOOP costs correctly. For the remaining 76 enrollees, sponsors did not transfer TrOOP costs in accordance with Federal requirements. We estimated that the enrollees and the Federal Government (on behalf of the enrollees) overpaid their shares of the drug costs by $1.1 million and $480,000 respectively, while the sponsors underpaid their respective share of the drug costs by $1.6 million. Had the sponsors transferred TrOOP costs in accordance with Federal requirements, the enrollees and Federal Government would have saved a total of $1.6 million in 2010. CMS and the TrOOP facilitator did not have adequate procedures to ensure that (1) FIR transactions are initiated to transfer TrOOP costs between plans, (2) all FIR transactions are complete, and (3) plans are properly updating PDE records. CMS did not provide adequate oversight of sponsors to ensure the transfer of all TrOOP costs when enrollees changed prescription drug plans.

We recommended that CMS transfer TrOOP costs in accordance with Federal requirements for enrollees who change plans, which would have saved the enrollees $1.1 million and the Federal Government $480,000 in 2010 and implement controls to (1) ensure the TrOOP facilitator initiates FIR transactions to transfer TrOOP balances from plans providing services to non-enrollees and from previously rejected FIRs that have since been corrected, (2) compare FIR to PDE records to determine which FIR transactions are incomplete and require plan resubmission, and (3) ensure subsequent plan sponsors are properly updating PDE records with reported FIR information. CMS concurred with our recommendations.