updated 5/8/2007 12:21:33 AM ET 2007-05-08T04:21:33

Some of the aid intended for the poorest of Medicare's participants — tens of millions of dollars — probably never made it to them during the first year of the new Medicare drug benefit.

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Some so-called dual-eligibles — seniors and disabled people whose incomes are so low that they also qualify for Medicaid — were never told that they could seek reimbursement for some drug-related expenses, federal investigators say in a report to be released Tuesday.

The Bush administration took extra precautions to help the group. It said that the government should cover the cost of medicine for dual-eligibles retroactively — back to the first day of the month when the beneficiary became eligible for Medicaid.

The federal government pays the insurers for that retroactive coverage — about $100 million in 2006. Then, the plans are required to reimburse their dual-eligible customers for drug costs incurred during those months when they were eligible for extra help but not yet in their new plan.

"Given the vulnerability of the dual-eligible population, it seems unlikely that the majority of these beneficiaries would have contacted their (insurance plan) for reimbursement if they were not notified of their right to do so," the Government Accountability Office said.

The agency that oversees the drug benefit, the Centers for Medicare and Medicaid Services, recently revised the letter it uses to notify dual-eligibles they've been enrolled in a drug plan. The letter now lets beneficiaries know they may be eligible for reimbursement of previous expenses.

Medicare officials said the challenges associated with moving more than 6 million dual-eligibles into the new drug benefit were immense. In that context, the report's recommendations constitute minor refinements for the program, which cost the federal government about $30 billion last year.

"We must object to the overwhelmingly negative tone of the findings set forth in this report," said Leslie Norwalk, acting administrator for the Centers for Medicare and Medicaid Services. "We believe that an evenhanded report would begin by prominently acknowledging the overall success of CMS' efforts."

Norwalk took issue with the investigators' conclusion that CMS put the Medicare program at risk of paying insurers for several months when they are not providing drug benefits. She said the conclusion was unsubstantiated.

Indeed, the agency has educated partners that insurers have an obligation to reimburse their customers or other payers for costs that customers incurred during the retroactive period.

But senators seemed to side with the investigators.

"I'm very disturbed that CMS paid out about $100 million to plans to pay claims for dual eligibles, yet CMS can't say if the plans lived up to their obligations," said Sen. Charles Grassley, R-Iowa. "Apparently, both the beneficiaries and the government were shortchanged."

Sen. Max Baucus, D-Mont., said the report indicates serious gaps in the information that low-income enrollees are given and the financial help they receive. Sen. Jay Rockefeller, D-W.Va., said the report sheds light on "yet another example of how private plans are being grossly overpaid for services they have not provided."

But Karen Ignagni, president and CEO of a trade group representing the insurance industry, said the insurers know about the requirements for reimbursing beneficiaries for retroactive drug expenses, and they are strongly committed to doing so.

"There is no confusion within the health plan community about that responsibility," she said.

At times, there have been problems with government databases that can cause delays in reimbursement by insurers, she said.

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