For Immediate Release
Office of the Press Secretary
August 29, 2005

Press Briefing by Conference Call with Dr. Mark McClellan

4:05 P.M. EDT

DR. MCCLELLAN: Thank you all for joining us this afternoon. As you know, today the President announced that Medicare beneficiaries will have choices for their prescription drug coverage that will cost less, and they include options that offer more benefits than originally expected. If you don't have it already -- and you all usually get these things quickly -- the information on these announcements is available on our web site at CMS.HHS.gov. There is an overall press release; there are specific fact sheets for availability of low-cost plans and additional benefit plans in each region of the country, and there are some more details about the availability of zero premium plans for people with limited incomes.

This is great news for people with Medicare. They will be able to choose prescription drug plans costing $20 a month, or even less, while still getting medically necessary treatments and prescriptions at convenient pharmacies.

Competition among the drug plans is working to drive down prices for the coverage and for the prescription drugs that seniors and people with disability need. Medicare beneficiaries will be able to choose from at least one prescription plan with premiums below $20 a month in every part of the country, except Alaska. In many regions of the country, the premiums are likely to be significantly below $20, and all regions have multiple plan options with premiums significantly below $30 a month.

In every region of the country, prescription drug plans will have zero deductibles, as well as plans with deductibles that are lower than Medicare's standard $250 annual deductible. That means people will have options that start helping them pay for their drugs with the first prescription they buy.

Also, in every region of the country, plans will be available that offer coverage in addition to Medicare's standard plan. This includes help for beneficiaries with costs beyond $2,250 in drug spending, and before their out-of-pocket costs hit $3,600 a year. Those are the basic features of the Medicare standard benefit, and, in other words, that means that some options will be available that provide additional coverage within this gap in Medicare standard benefits. For example, some plans will cover generic drugs through this coverage gap.

So, as you can see, prescription drug coverage is going to be broader than many people expected, it's going to be less expensive in terms of the options available and many people expected. Medicare beneficiaries will be able to choose plans with lower deductibles, broader coverage. And that means that seniors and people with a disability will have options to find a plan that best fits their individual needs. And we are going to be working very hard to make sure that people can get a good fit. We are working around the country, as the President mentioned today. In addition, we're collaborating with any organizations inside and outside of the federal government to make sure that we're reaching seniors and the people who care about them, where they live and work and play and pray.

Thank you all again for joining us. And I'm going to stop now and take questions. I'd ask you to identify yourself before or when you ask your question. Thank you.

Q Hi, Dr. McClellan. Just to clarify something; when you say that the premiums are lower than expected, are you referring to the $32.20 that was stated earlier this month, the $20 lower than that? Or is there some other figure you're comparing it to?

DR. McCLELLAN: Tony, we're not making any new estimates of what the average premium will be next year nationwide. And that $32.20 that you mention, that's an estimate that we announced several weeks ago based on the actual plan information that we're seeing.

Previously, the estimates from the independent experts were based on projections or expectations. Now we have actual data based on how the Medicare program -- how the Medicare drug benefit will work in 2006. And we are seeing a robust, competitive response, and that means that costs are coming in lower than expected.

We did release today some state-by-state estimates of the average premium and they range a bit around $32. So in some states, for example, I'm visiting Arizona and California with the President today -- the average premium is expected to be lower than $32.20. In Arizona, it's around $28. In California, it's less than $26. But the main new thing that we're announcing today is that, as we've continued our review of the prescription drug plans, it has become clear that there will be plan options available that are significantly less expensive than this average. We're not issuing a new average; we are simply making information available on the specific drug plans that will be offered around the country. All over the country, there will be plans that cost less than $20 a month, many options that are less than $25 or $30 a month, those significantly below that average that we announced earlier.

Q Hi, Dr. McClellan. You have released a number of plans that are below $35 in each region. Can you tell us, generally speaking, how many plans total there are in each region, and why you didn't release that together with the lower price --

DR. McCLELLAN: Yes, we are still finalizing our negotiations with many of the plans, particularly plans that are offering some of the higher premium levels. And so we don't have any final numbers at this point on the number of total options that will be available. We have released today the estimated number of organizations that are going to be participating in prescribing the drug coverage around the country, and in each region of the country, there will be between 11 and 23 organizations offering stand-alone prescription drug coverage.

But as I said, we are continuing our negotiations with the specific plans to make sure any plans that are offered provide a real value to some of our beneficiaries, that it's a valuable choice. So, for example, there will be options that include additional benefits; there will be options that include no or low deductible; and then, obviously, there are going to be a number of options that have lower premiums average.

So I don't have any final number on the total amount of plans that will be available, but we are on schedule with our negotiations with the drug plans. We expect to finalize the contracts by around mid-September, and we will make available additional specific information in the coming weeks.

Q Just -- like in one region, you have 22 plans -- I think it's New Hampshire, Maine -- you have 22 plans that are below $35, and the average premium is $35, around $35. I mean, the way I -- just doing the math, wouldn't you expect to see about 22 plans above $35, just to get to that average?

DR. McCLELLAN: No, not necessarily. Many of the plans that are below the average may be plans that have relatively high rates of enrollment -- for example, some of the existing Medicare Advantage plans that are very popular in some parts of the country. And the estimated premiums are based on our overall review of all of the plan options that have been submitted.

Again, we're not at a point where we've approved a number of specific drug plans. We are getting very close to that point, so that's why we can provide some additional details now. At the higher premium levels, I expect there may be some plans that because of the competitive situation, decide that they're not going to actively market. But we'll see, as we conclude these negotiations over the next few weeks.

Q Dr. McClellan, I just wanted to clarify one thing. In the press release that went out, or the advisory about this conference, it was said that this would be on background --

Mr. KARR: No, it's on the record, Larry.

Q I just want to make sure that everybody understands that this is on the record -- is that correct?

Mr. KARR: I was about to interrupt with that when I heard you come in. So we're on the record.

Q Okay, thank you.

DR. McCLELLAN: Thanks for that, Larry.

Q Hi, thank you. Two questions. First a clarification. Is there a plan with a premium in Alaska that's below $20 a month?

DR. McCLELLAN: No. Alaska is one state that does not look, at this point, like it's going to have a plan with a premium below $20. There are a number of plans in Alaska that will be available with premiums significantly below $30 -- the chart that we put out with the press release, Alaska is region 34, and we're expecting around four plans with premiums in the $20 to $25 range, four more with --

Q Another question I had was, as beneficiaries see the different options available in different parts of the country, as they talk to their friends and that type of thing, what would be your response to those people who say, it's not fair that I'm here in Alaska paying $28 a month or $30 a month --

DR. McCLELLAN: Well, in every region of the country, there are plans that are going to meet Medicare standards -- very far along in the -- process -- that offer the drug coverage at a lower than expected cost. And that means that no matter where you live, if you look, if you spend a little bit of effort figuring out which plan is a good fit -- and again, we'll be there to help you -- you can find a plan that is inexpensive. It's much less expensive that people expected.

In Alaska, where many things are considerably more costly, there are going to be plans in the neighborhood of $20. In other parts of the country, it's even less expensive than that. In all parts of the country, this is significantly lower pricing than people had expected when the benefit was set up. And that's really the advantage of having choices. The drug plans know that if they're not offering a really good value, meaning low prices and the coverage that people want from additional benefits, people are going to go elsewhere.

Q One more thing. Is there anybody, any beneficiary out there who shouldn't sign up for the drug benefit?

DR. McCLELLAN: There are many people who have employer coverage right now who will get their coverage through their employer. You may have seen surveys, a number of people saying they weren't planning to enroll. Well, most of those are people who said they're already happy with the employer coverage that they have now. And what those employers are generally doing is taking new subsidies from Medicare to make that coverage secure.

Q So unless you already have employer coverage and it's continuing, you're saying, sign up --

DR. McCLELLAN: Definitely take a close look. As the President said today, it's worth taking a look. The numbers that we are seeing from the actual plans that will be offered show that people can get coverage that, on average, will pay out to around $1,200 a year for under $20 or $25 a month. That's worth taking a look at.

Q Mark, putting on your economist hat, do you have any sense as to how much of this downward pressure on the pricing is, in fact, related to the insurance competition, as distinct from the efforts to negotiate lower prices with the pharmaceutical companies? Or is there any way to discern what is really driving the prices down?

DR. McCLELLAN: Good question, Susan. I think both of those go together. Because there is strong competition among the drug plans, the drug plans know they need to be very aggressive in their pricing, and that means ones that are able to do the best job of pushing down prices through volume negotiations with the drug manufacturers are going to be able to offer the coverage at a lower premium. The plans that will be available have to meet all of Medicare's standards. That includes standards for covering all medically necessary treatments; it includes standards for actuarial soundness of the plans. So the only way you're going to be able to get prices way down is by being very aggressive with the drug prices that you negotiate with manufacturers.

Q And is it your sense that those offering the plans across-the-board are getting those lower prices, or what?

DR. McCLELLAN: Well, there are going to be drug plans with a range of premiums available. I think one of the earlier callers pointed out some of the plans will have premiums that are significantly higher. So it's not clear to me at this point that all of the plans are being very aggressive with their price negotiation, but it is getting pretty clear that many of them are pricing very aggressively. That includes getting prices down from manufacturers.

Q And just one other quick question. There was a reference in the press release to the final review of the plans' evaluating factors, including whether there is adequate access to drugs and pharmacies convenient to homes of beneficiaries. Is that, itself, raising its head as a significant problem?

DR. McCLELLAN: We're seeing most plans meeting the pharmacy network standards. Certainly for retail pharmacies -- are very important, but we're also looking closely at other kinds of more specialized pharmacies, like long-term care pharmacies, so-called home -- pharmacy services. And we're spending a little bit extra time making sure that the plans are well-covered in all those areas. But the numbers that we're putting out today reflect a review of pharmacy network requirements that is also very far along.

Q And plans that have already met those standards?

DR. McCLELLAN: Right. We're not quite finished, but we're getting very close, so we're getting a clearer and clearer idea of what the options will be for seniors -- and we want to pass that information along as soon as it is clear.

Q Mark, one of the concerns that people have about this is there are actually too many choices, and that seniors will be overwhelmed with all of these decisions they're going to have to make. Can you give us some specifics about what you're going to do to help people navigate all of this?

DR. McCLELLAN: That's a good question, Howard, and over the next month we'll be talking more about this. The tools available to help beneficiaries come on online, they come over the phone, and they come in face-to-face help that people can get in their own community. We're not only targeting beneficiaries with -- tools, but we're also targeting their family members, the health professionals that work with them, counselors, advisors and others they depend on for their financial and health decisions already today.

Just to give you an example, we've been working on a tool that people can access online at Medicare.gov. It will be available in mid-October that will enable them to use information from the Medicare program about their status -- for example, whether they're already on Medicaid or something like that, and about their prescription drug needs and preferences for formularies and other -- or preferences for pharmacies and other factors that are important to them to identify a very small number of plans that are a very good fit based on their particular needs. That kind of information will be available online. And we're in the process of getting public feedback on it right now. There have been data test versions up on our website that have been reviewed by many -- experts over the last -- over the past month.

We're also going to have similar kinds of tools available for people who call us at 1-800-MEDICARE, our customer service line. Most of our beneficiaries don't go online, but that's okay. They can also get help over the phone.

And then as the President mentioned today, we've been spending a lot of time going around the country to establish partnerships with many local organizations that already help seniors and people with a disability and those who care about them, make important decisions about health benefits and finance -- include state health insurance assistance programs that provide local one-on-one counseling all over the country. They include local area agencies on aging that have long helped seniors get assistance with meeting their health care needs -- face-to-face help, includes organizations like the Salvation Army that was represented on stage with the President today. Many church groups, many community organizations, all participating in the effort to help people make an informed decision about coverage.

So there will be choices. But as you can see from the information that we're releasing today, many of those choices are enabling people to get the coverage they need at a much lower cost than had been expected. That's why it's important for us to partner with seniors to help them take a look at this coverage and get a good fit. It helps us keep the costs down; it helps seniors get the benefits they need; it helps make sure Medicare is staying up to date as affordably as possible.

Q One other quick factual thing. Do you expect to -- still expect to have -- to be able to approve these plans by mid-September?

DR. McCLELLAN: We are on schedule with the implementation of the drug benefit, so we are expecting to send out contracts in the coming days and to get those contracts generally resolved by mid-September. And as we soon as we've got that process complete and been able to pull together all the numbers and factual information for plans, we'll have even more specific information out, ahead of when beneficiaries will be able to make a decision --

Q So will we be able to get specific information about specific plans after September 15th?

DR. McCLELLAN: That's exactly what we're planning to do as soon as possible. Now, obviously, the specific plans can't start marketing until the beginning of October, and we don't want to do anything that would amount to letting some specific plans really jump the gun on that time frame. But we do intend to provide a more -- an even more comprehensive summary of what -- of the plans that will be available before marketing begins in October, as well as giving -- making sure beneficiaries and all of you know about the tools that are available, or that will be available, to help people choose among the plans and get their drugs needs met at the lowest possible cost.

Q Hi, Dr. McClellan. Thanks very much for this opportunity. I have two quick questions. I wasn't able to look at the -- to find the spreadsheet on the state averages or the regional averages, but can you tell me what's the average in Ohio for the monthly premium and --

DR. McCLELLAN: Sure, Susan. The average --

Q And -- I'm sorry -- and generally, why is it more or less than other regions, than California, for example?

DR. McCLELLAN: That's a good question. Ohio has a weighted average premium that we're expecting to be around $32.90, so it's very close to the national average overall. Ohio also has three -- we think about three plans that will be available, with premiums under $20.

Q How many?

DR. McCLELLAN: Three plan options that will be available with premiums under $20, and another 11 options that will be available with premiums under $30 a month. And some of those options include extra coverage, like a lower deductible or some additional benefits in the so-called coverage gap. And again, as Howard asked me about, we will be providing even more specific information in the weeks ahead as we get these contracts finally resolved and all the details in place.

There is some variation in the weighted average premium from region to region around the country. The numbers run from around -- a little bit under $26 a month up to around $37 a month, in terms of the weighted averages. One reason for that variation is that we count Medicare Advantage plans based on their current Medicare Advantage enrollment. And there are some states in the country where there's historically been much more Medicare Advantage enrollment than others. California is one of them, and that's one reason their weighted average premium is lower. The Medicare Advantage plans are generally offering lower premiums for Part D coverage and additional coverage beyond these Medicare benefits, just as they have been doing for other benefits prior to now.

But in every region of the country, there will be prescription drug plan options available that get down to that level of $25 or even below. And in most cases, we'll have multiple options at that level. That's why it's important to take a look at plans available in Ohio, where they will be offering lower premiums than expected, and additional benefits.

Q And when you say that Medicare enrollment was one of the factors in the weighted average, can you give me an example of other factors that you used?

DR. McCLELLAN: Other factors are basically the distribution of premiums offered by the prescription drug plans. Some of the prescription drug plans have premiums that are significantly higher than this average, obviously. And my guess is that when people take a close look, see how their benefits can be met, that many will end up signing up for less costly plans. And we're going to provide the support tools they need to make an informed decision about whether those lower cost plans can meet all their needs. They certainly are going to meet all the Medicare standards.

Q And just one last question. You're still negotiating with the plans and these plans are not final, which is why you can't give us much --

DR. McCLELLAN: That's right -- these are approximate numbers. But we are very far along in the negotiation process. The bids, the premiums for each plan, those are essentially done. We are making sure that the plans are, in fact, intent on marketing -- even if they have higher premiums, that all of the pharmacy network requirements are met, not just for retail pharmacies, but also for long-term care services. We are double-checking to make sure all the actuarial financial requirements of the plans are met, and then we're going to get the contract signed, and make sure that all the plans have formally agreed to abide by Medicare's terms and conditions.

Q So will there definitely be between 11 and 23 plans available in each region?

DR. McCLELLAN: There's 11 to 23 organizations offering plans in each regions.

Q Organizations -- will there definitely be 11 to 23?

DR. McCLELLAN: Well, again, it's possible that one or a few may either pull out or not meet all of our standards. I think we're putting -- we're putting these numbers out because we are pretty confident that the final numbers are going to look a lot like what we're showing you today. But I do want to keep that caveat in place, that we haven't quite finished the negotiations. I'm getting a lot of questions, obviously, about what kinds of plan options will be available, and we're trying to pass along information as it's ready.

Q Hi, Dr. McClellan. The press release also mentions plans that offer lower or no deductibles, or some coverage in the gap. Are those type of plans available for these prices --

DR. McCLELLAN: There will be some plans that offer enhanced coverage for less than $30, I believe in just about every region of the country. The coverage enhancements may be filling in the deductible, it may be providing some coverage in the gap, it may be some combination.

In addition, there are some plans that are offering standard coverage, but lowering the deductible. So they provide the same actuarial value of coverage, but they spread it out, starting with the first prescription that a beneficiary buys. And there are -- but what I've heard and what I think the plans realize is that there are some beneficiaries who want, for more predictability, want the coverage starting with the first dollar that they spend, so to meet those beneficiaries' preferences, there will be plans available in every region --

Q And these are stand-alone plans you're talking about?

DR. McCLELLAN: Yes, these are -- everything I'm talking about here, and everything in the chart that we released today is for stand-alone plans because, again, the Medicare Advantage plans, which are going to be very widely available, generally have significantly lower premiums, so there will be many Medicare Advantage plans in just about every region of the country, with premiums under $20 for drugs. And many, if not most of these plans, offer additional coverage beyond the --

Okay, thank you all very much.

END 4:31 EDT