How did Medicare prescription-drug plan go wrong?

WASHINGTON — The new Medicare prescription-drug program was supposed to start humming almost with the flick of a switch. As the Bush administration envisioned it, beginning Jan. 1, millions of Medicare beneficiaries would be able to go to their pharmacies and get hefty discounts on their prescriptions.

But in the opening days, when druggists tried to enter customers' names into the computerized verification system, what they got was an ominous message: "host down" — cyber talk for system overloaded, unable to respond. Computer-system operators were still frantically uploading the names and other information on tens of thousands of Medicare recipients. Three weeks later, Medicare is still catching up, although top officials say the situation is improving.

Creation of the Medicare prescription-drug benefit, the biggest expansion of the health-care program for the elderly in decades, was to be the crown jewel of the Bush administration's domestic record — the first large-scale test of its theory that the best way to deliver social services is through the private sector. And before Jan. 1, administration officials confidently predicted that concerns about the complex program soon would evaporate.

With so much riding on the new program, and with the government's best health-care experts having had two years to prepare, how could the launch have stumbled so badly?

How did it happen that crucial computer databases were not ready, and that when they did become available, were found to be shot through with errors? Why were telephone help lines understaffed? Why was the system plunged into such confusion and uncertainty that hundreds of thousands of elderly Medicare recipients were in danger of not getting medication?

And why was the response from Washington, D.C., and its private partners in the medical-insurance industry so faltering that governors of more than 20 states felt compelled to step in and guarantee payments?

Critics in both political parties say senior officials brushed aside advance warnings. In preparing for the launch, they made their plans on the basis of optimistic assumptions that things would go relatively smoothly. And high officials were so committed to their vision that they resisted suggestions to modify the details of their strategy.

"We pointed out all of the predictable problems, and they have been realized," Sen. Gordon Smith, chairman of the Senate Special Committee on Aging, said last week. "The administration had a lot of pride of ownership in the initial legislation," the Oregon Republican added, and anyone who suggested changes "was persona non grata."

But Congress, which approved the legislation largely along party lines, also shares in the blame.

For example, the Jan. 1 switch in drug coverage from Medicaid to Medicare for more than 6 million low-income seniors and disabled people was written into the legislation. The one-day changeover is widely acknowledged to be the biggest source of problems. There were repeated warnings against trying to handle such a big transition so quickly, but the one-day switch remained.

Congress was deeply involved in other provisions as well. According to Medicare Administrator Mark McClellan, for example, the law allows Medicare beneficiaries to sign up for a coverage plan up to the last day of a month and get service the first day of the following month. That caused big problems at the launch.

Last year, when seniors seemed reluctant to sign up, administration officials had predicted that doubts would melt away and enrollments would surge in late December. When that happened, and thousands of seniors signed up, there was not enough time to process the paperwork in time for the Jan. 1 start-up.

There also were problems with the private insurance companies that were to create and administer the drug plans. Dozens of plans were offered, each with its own list of covered drugs and its own prices. For individual recipients, finding the best plan was complicated. That increased the likelihood of last-minute decisions.

Moreover, there were clashes between Medicare, with its mandate to deliver services, and some of the private drug plans, with their concern for keeping costs in check.

Government officials discovered that some companies were not abiding by rules they had agreed to follow. For example, some plans failed to honor a requirement to provide transitional coverage of drugs not on their approved list. Medicare sent out an urgent notice insisting the policy be followed.

Top agency officials put too much confidence in the private drug plans, said Rep. Pete Stark of California, ranking Democrat on the House committee that oversees Medicare. "It's beyond blind faith," he said.

Health and Human Services Secretary Michael Leavitt said that much progress has been made but that some glitches will persist until every beneficiary has used his or her drug card at least once.

"There is a spotlight on this now," Leavitt said. "The vast majority of people using the benefit have not had a problem. For the people who have had a problem, it is a big problem. We are working it one person at a time, one pharmacy at a time."