Background

The enactment of the MMA in December 2003 added a voluntary  outpatient prescription drug benefit to the Medicare program, known as  Medicare Part D. Prior to this, the Medicare program did not generally pay  for outpatient drugs. The new Medicare Part D drug benefit, which became  available in January 2006, enables Medicare beneficiaries to select among  private drug plans sponsored by private companies. Beneficiaries who  elect to enroll in a Part D plan are responsible for a monthly premium,  which varies by the individual plan selected. A key element of the  prescription drug benefit is the low-income subsidy, or “extra help,”  available to low-income elderly and disabled individuals to assist them in  paying their premiums, deductibles, and co-payments. Without the  subsidy, individuals enrolled in Part D would have to pay greater out-of- pocket costs for their prescription medications.
While the Department of Health and Human Services’ CMS has  responsibility for implementing the Part D prescription drug benefit, SSA  is responsible for administering the subsidy. The MMA requires that SSA  solicit and process subsidy applications to determine applicants’ eligibility,  resolve appeals for applicants dissatisfied with their subsidy  determinations, and periodically redetermine individuals’ continued  eligibility. SSA transmits information on its approved subsidy  determinations and individuals’ subsidy levels to CMS, which in turn  transmits the information to the appropriate drug plan. CMS provides  information to SSA and to prescription drug plans for individuals who  automatically qualify for the subsidy and the Part D prescription drug  benefit, based on information it receives from state Medicaid agencies on  individuals’ eligibility for Medicaid and from SSA on individuals who  receive Supplemental Security Income (SSI). SSA also withholds premium  payments from the monthly Social Security checks of individuals who  elect this payment option; otherwise, individuals make direct payments to  their selected prescription drug plan. Figure 1 shows the flow of  information among SSA, CMS, state Medicaid agencies, prescription drug  plans, pharmacies, and beneficiaries.
To implement the new responsibilities under the MMA, SSA established a  Medicare Planning and Implementation Task Force in December 2003. The  objectives of the task force included determining the affected population;  the number of staff, locations, and material resources needed; and  agreeing on specific responsibilities with other federal government  agencies. Under the MMA, the Congress provided SSA with a $500 million  appropriation from the Federal Hospital Insurance Trust Fund and the  Federal Supplementary Medical Insurance Trust Fund to pay for the  initiation of SSA’s Part D responsibilities for fiscal years 2004 and 2005,  but later extended the appropriation to fiscal year 2006. The appropriation  was exhausted in fiscal year 2006, and MMA spending is now subject to  SSA’s overall spending ceiling under the Limitation on Administrative  Expenses appropriation.

		Eligibility for the Medicare Part D Low-Income Subsidy

All Medicare beneficiaries entitled to benefits under Medicare Part A or  enrolled in Part B are eligible to enroll in Medicare Part D. Some Medicare  beneficiaries automatically qualify for the low-income subsidy, while  others are required to apply for it and must meet the eligibility  requirements established under the MMA. Those eligible for the subsidy  generally fall into three broad categories (table 1 describes the Part D low- income subsidy associated with each category, as well as the costs for  Medicare beneficiaries who do not qualify for the subsidy).
Full-benefit dual eligibles: These are low-income Medicare  beneficiaries who qualify for full coverage under their state’s Medicaid  program, which, prior to the effective date of Part D, provided  coverage for their outpatient prescription drug costs. These individuals  are automatically enrolled by CMS in the Part D prescription drug  program. They automatically qualify for the full subsidy and do not  need to file an application. These beneficiaries are referred to as  “deemed.”
Partial-benefit dual eligibles: These are Medicare beneficiaries who  qualify for more limited Medicaid coverage, SSI, or state Medicare  Savings Programs. Similar to full-benefit dual eligibles, they are  automatically enrolled in a Part D prescription drug plan by CMS.  They also automatically qualify for the full subsidy and do not need  to file an application. They are also referred to as “deemed.”
Other Medicare beneficiaries: Medicare beneficiaries who are not  deemed eligible must apply and meet the income and resource  requirements to receive the subsidy. These beneficiaries generally  qualify if they have incomes below 150 percent of the federal  poverty level and have limited resources. In addition to applying for  the subsidy, these individuals must also apply to enroll in the Part D  prescription drug plan. Low-income subsidy benefits are provided  to these individuals on a sliding scale, depending on their income  and resources.

		Applying for the Subsidy

Medicare beneficiaries who do not automatically qualify for the Part D  low-income subsidy can apply for the benefit directly through SSA or  through their state Medicaid office. Individuals who apply through SSA  may submit their subsidy application using SSA’s paper application or an  Internet application form. Applicants may also have their information  entered electronically by visiting an SSA field office or by calling SSA’s  toll-free phone line. On the basis of applicant’s income and resource  information, SSA issues a letter to inform the applicant of whether or not  he or she has been approved for the subsidy. SSA sends a predecisional  notice to applicants who appear to be ineligible for the subsidy based on  the income and resource information they provided, and allows them   20 days to provide other information for the agency to consider. If  applicants do not provide such information within the required time frame,  SSA sends a final letter to inform them that they do not qualify for the  subsidy. If an individual applies for the subsidy through SSA, SSA is  responsible for resolving any subsequent appeals, and for redetermining  the applicant’s continued subsidy eligibility.
As required by the MMA, beneficiaries may also apply for the subsidy  through their state Medicaid office. However, according to state Medicaid  officials we spoke with, they have encouraged beneficiaries to apply for  the subsidy through SSA whenever possible. To prepare for those  beneficiaries that request to have their subsidy applications processed by   a state office, state Medicaid officials we spoke to said that they modified  their Medicare Savings Program or Medicaid applications, when  appropriate, to collect the necessary information for subsidy  determinations. As of March 2007, only the Colorado and Kansas state  Medicaid agencies have made Part D subsidy determinations. When state  Medicaid agencies make subsidy determinations for individuals, they are  also responsible for subsequent appeals and redetermination decisions.

	SSA Has Made Progress in Approving Subsidy Applicants, despite Barriers That Hindered Its Outreach Efforts, but Measuring Its Success Is Difficult

SSA approved 2.2 million subsidy applicants as of March 2007, despite  factors that limited its efforts to identify the eligible population and solicit  applications; however, measuring the success of its efforts is difficult  because there are no reliable data on the size of the eligible population.   To compensate for the lack of reliable data on the eligible population, SSA  used data from a variety of federal sources to initially target its outreach  effort to approximately 18.6 million potentially eligible Medicare  beneficiaries, which it believed to be an overestimate of the potentially  eligible population. To solicit applications from the approximately   18.6 million Medicare beneficiaries, SSA launched an outreach effort that  included mass mailings and a public campaign of over 76,000 events held  nationwide. Though individuals’ reluctance to share personal financial  information and other factors that initially hindered SSA’s solicitation  efforts have lessened, various advocacy groups are concerned that  eligibility requirements and a complicated application may discourage  potential applicants. While advocacy group and state Medicaid agency  officials we interviewed believe that SSA has made some contact with all  Medicare beneficiaries eligible for the subsidy, they say that more  personalized assistance, such as door to door contact, is needed. While  SSA provides various personalized services to assist individuals in  completing their subsidy applications, agency officials told us that SSA  does not have the resources to go door to door to make contacts. We  found that the subsidy program’s participation rate compares favorably to  those of other low-income programs at similar stages of implementation.  However, because no reliable data exist on the population of potential  eligibles, it is unclear how effective SSA’s outreach efforts have been.

		SSA Approved 2.2 Million Subsidy Applicants, despite Barriers Limiting Its Ability to Identify the Eligible Population and Solicit Applications

Although SSA faced barriers in identifying the population eligible for the  subsidy and soliciting applications from individuals, it had approved   2.2 million subsidy applicants as of March 2007. SSA conducted its initial  outreach campaign from May 2005 to August 2006 to educate individuals  about the subsidy and to help them apply for it. SSA officials told us that  their outreach goals were to (1) ensure that as many individuals  potentially eligible for the subsidy were informed of the benefit, (2) ensure  that all potentially eligible Medicare beneficiaries had an opportunity to  apply for the benefit, and (3) solicit 5 million subsidy applications over  fiscal years 2005 and 2006 (SSA actually received 5.5 million applications  during this time period). To accomplish these goals, SSA launched an  outreach campaign that included over 76,000 events conducted in  collaboration with various federal, state, and local partners, such as state  Medicaid agencies, state health insurance programs, and various advocacy  groups for Medicare beneficiaries. SSA carried out the campaign by  requiring each of its field offices to conduct a certain number of outreach  events. These events were held at senior citizen centers, public housing  authorities, churches, pharmacies, and other venues. As figure 2 shows,  the number of outreach events has declined significantly, from a high   of 12,150 in July 2005 to 230 at the completion of the campaign in   August 2006.
Although SSA’s initial outreach campaign has ended, SSA is continuing to  conduct outreach efforts to solicit applications from individuals  potentially eligible for the subsidy. For example, SSA has conducted  various activities to increase subsidy applications from individuals in rural  and homeless communities. SSA also recently launched a new strategy  during the week of Mother’s Day to inform relatives and caregivers about  the subsidy, and is planning a similar effort during Father’s Day.  Additionally, SSA is targeting approximately 630,000 dual eligibles who  lost their automatic eligibility for the subsidy to help them apply for the  subsidy. While SSA has incorporated its strategy for continuing subsidy  outreach efforts into its National Strategic Communications Plan, the plan  does not contain specific performance goals and measures. As a result,  SSA has no basis for assessing its progress and identifying areas that  require improvement.

			Barriers That Limited SSA’s Efforts in Identifying the Eligible Population

SSA initially targeted 18.6 million individuals who might be eligible for the  subsidy, which was an overestimate of the eligible population. SSA took  this approach because there were no reliable data on the size of the  eligible population. SSA developed the targeted population to which to  mail the subsidy applications by screening out Medicare beneficiaries  whose income made them ineligible for the Part D subsidy using income  data from its benefit records, as well as income data from the Office of  Personnel Management, the Department of Veterans Affairs, the Railroad  Retirement Board, and the Office of Child Support Enforcement of the  Department of Health and Human Services (HHS). SSA realized that using  these data sources would result in an overestimate of the number of  individuals who might qualify for the subsidy. While the data provided  information on individuals’ income, it provided limited information on  individuals’ assets or nonwage income, which is needed to determine  eligibility for the subsidy. Because of the lack of such information, SSA  proceeded with a more generalized targeting of Medicare beneficiaries to  ensure that all individuals who were potentially eligible for the subsidy  were made aware of the benefit and had an opportunity to apply for it. SSA  officials said that they would have preferred to specifically target Medicare  beneficiaries who were more likely to be eligible for the subsidy by using  tax data from IRS on individuals’ wage, interest, and pension income,  which would be needed to determine individuals’ level of income and  assets. Without such data, SSA can neither estimate how many individuals  might qualify for the subsidy nor identify individuals to target for more  direct outreach. The officials said that their prior experience with other  low-income-based programs had shown that more targeted outreach  efforts helped to elicit a higher response rate. Current law permits SSA to  obtain income and asset data from IRS to assist in verifying income and  asset data provided by individuals who have applied for the subsidy.  However, to protect the privacy of taxpayer information and enhance tax  compliance, the law prohibits disclosures of such information to identify  individuals who may be eligible for the subsidy, but have not applied.
In a November 2006 report, the HHS Office of Inspector General reported  that legislation is needed to provide SSA and CMS access to income tax  data to help the agencies more effectively identify beneficiaries potentially  eligible for the subsidy. While SSA uses various sources of information to  identify individuals’ income, it does not have access to income data that  could assist in imputing an individual’s level of assets, which it believes  could be provided through IRS income tax data. SSA estimates individuals’  assets because IRS income tax return and other tax data do not contain  asset information. However, IRS officials told us that its data have many  limitations that could affect their usefulness. For example, IRS officials  said that they have limited data on assets for individuals whose income is  less than $20,000, because these individuals do not typically have interest  income, private pensions, or dividend income from stocks that could assist  SSA in estimating an individual’s potential asset level. Also, the officials  said that many people with low incomes are not required to file taxes, and  therefore IRS would have only limited information on them. IRS officials  also explained that tax data could most likely identify individuals who  would not qualify for the subsidy, rather than those who would.  Conversely, the officials stated that tax data might incorrectly eliminate  some people who might qualify for the subsidy, which could result in SSA  not contacting them. Moreover, the IRS officials said that the data it  provides to SSA to determine eligibility could be almost 2 years old and  may not reflect an individual’s current income. For example, for subsidy  applications in 2007, the last full year of tax data the IRS could provide  would be for 2005. Given these various factors, IRS officials stated that  summarily sharing private taxpayer data to identify individuals who could  qualify for the subsidy, and the potential cost of systems changes, would  have to be weighed against the added value of the data. Despite IRS’s  position on the limitations of its data on low-income taxpayers, SSA  officials believe that IRS data can still help to better target the eligible  population. However, no effort has been undertaken to determine the  extent to which IRS income data could benefit SSA in this effort, or  improve estimates of the eligible population. Legislation is currently  pending before the Congress to permit IRS to share taxpayer data with  SSA to assist the agency in better identifying individuals who might be  eligible for the subsidy.

			Barriers That Limited SSA’s Solicitation Efforts

Although SSA has approved 2.2 million applicants for the subsidy, it  initially faced difficulties in soliciting applications. To solicit applications,  SSA sent its first targeted mailing to the 18.6 million potentially eligible  individuals between May and August 2005. The mailings included an  application for the subsidy and instructions on how to apply. SSA worked  with various focus groups to develop the application, which included  questions about applicants’ income and resources, the value of life  insurance policies, and household size. Appendix II provides the total  number of subsidy applications mailed by state. After the subsidy  applications were mailed, a contractor then made phone calls to   9.1 million beneficiaries who had not responded to the initial mailing, and  SSA made 400,000 follow-up calls to the beneficiaries who requested SSA  assistance. SSA also conducted other follow-up efforts, including sending  follow-up notices to individuals whom the contractor was unable to  contact and to specific subgroups that it identified as having a high  likelihood of qualifying for the subsidy, such as the disabled; individuals  over 79 years of age living in high-poverty areas; and individuals in  Spanish-speaking, Asian-American, and African-American households.   In addition, SSA called over 300,000 Medicare beneficiaries who had not  applied, but had previously qualified for a temporary Medicare drug  discount card, and included information about the subsidy in its 2005   and 2006 annual cost of living adjustment notices to Social Security  beneficiaries and its annual Medicare Savings Program outreach letters.
SSA’s efforts to solicit applications were hindered by various factors,  including individuals’ confusion over the difference between the  prescription drug program and the subsidy, the reluctance of some  individuals to share personal financial information, and eligibility  requirements, among other factors. According to SSA field office staff   and state Medicaid and advocacy group officials, many individuals were  confused about the difference between the prescription drug program   and the subsidy, and did not understand that they involved separate  application processes, although the subsidy application and the decision  letters explained that Part D enrollment was a separate process.  Consequently, some individuals thought that once they were approved for  the subsidy, they were automatically enrolled in a prescription drug plan  and vice versa to a lesser extent. SSA field office staff and advocacy group  officials also told us some individuals were reluctant to apply because they  did not want to share their personal financial information for fear that an  inadvertent error on the application could subject them to prosecution  under the application’s perjury clause. Though the impact of these factors  has lessened as individuals have become more educated about the  subsidy, concerns remain about eligibility requirements and the overall  complexity of the application. For example, SSA field office staff and  advocacy group officials said that the subsidy’s resource test may render  some low-income individuals ineligible because of retirement savings or  the value of other resources. Legislation has been proposed to increase the  resource limit to allow more beneficiaries to qualify for the subsidy.  Advocacy group officials also said that the application may be too  complex for many elderly and disabled beneficiaries to understand and  complete without the assistance of a third party. SSA headquarters  officials told us that they have revised the subsidy application several  times to address such concerns, but that much of the information that  applicants may view as complex is required by the MMA.

		Measuring the Success of SSA’s Outreach Efforts is Difficult because of the Lack of Reliable Data on the Eligible Population

Although the low-income subsidy participation rate compares somewhat  favorably to those of some low-income programs during similar stages of  implementation, the success of SSA’s efforts is uncertain because no  reliable data exist on the total number of individuals potentially eligible   for the subsidy. Using available estimates of the potentially eligible  population, SSA approved between 32 to 39 percent of the eligible  population who were not automatically deemed by CMS for the subsidy.  According to these estimates by CMS, the Congressional Budget Office,  and other entities, there are between about 3.4 million to 4.7 million  individuals who are eligible for the subsidy, but have not yet applied   (See table 2). In developing these estimates, however, these entities   faced the same data limitations as SSA in identifying potentially eligible  individuals.
SSA officials said that it is unfair to judge the success of its outreach  efforts for the subsidy in relation to these estimates, given the limitations  in identifying the size of the eligible population. SSA officials stated that  the program has been successful in meeting its internal outreach goals.  The advocacy group officials we interviewed agreed that SSA has  informed all Medicare beneficiaries of the benefit and provided them with  the opportunity to apply, but advocates questioned the effectiveness of  SSA’s outreach methods because of the lack of personal assistance  available for elderly and disabled individuals who may not be connected to  a social service organization and may not be able to go into an SSA field  office. Advocacy groups believe that a more personalized outreach  approach, such as door-to-door contact, is needed to encourage these  individuals to apply for the subsidy. However, SSA officials also stated that  door-to-door contact with individuals would be a resource intensive and  costly endeavor for the agency.
After over 2 years of implementation efforts, however, SSA’s estimated  participation rate of 32 to 39 percent of individuals who were not  automatically deemed eligible for the subsidy compares favorably to those  of some other low-income programs at a similar stage of implementation.  SSA’s participation rate is around 68 to 74 percent when the deemed  population is included. However, we focused on the participation rate of  the nondeemed population, because this is the population of individuals  who had to sign up for the subsidy and to whom SSA targeted its outreach  efforts. After its second year of national implementation in 1976, the Food  Stamp Program had an estimated participation rate of 31 percent. During  its second year of implementation in 1975, the SSI program had an  estimated participation rate of 50 percent for those 65 or older. According  to SSA officials, two-thirds of the early elderly participants were  automatically transferred from state government programs to SSI (these  individuals are similar to those deemed eligible for the Part D low-income  subsidy). In both instances, the low-income subsidy participation rate  compares favorably.

	SSA’s Processes for Determining Applicants’ Subsidy Eligibility, Resolving Appeals, and Redetermining Eligibility Lack Key Tools for Monitoring Performance

SSA has established subsidy application processes for determining  applicants’ subsidy eligibility, resolving appeals, and redetermining  subsidy eligibility, but has not established some key tools needed to  monitor the performance of all of its processes. For example, while SSA  tracks various information from its subsidy application processes through  its Medicare database and other means, it does not track information on  processing times for redeterminations, and does not currently have  performance goals to monitor the timeliness of appeals and individual  redetermination decisions. To enable agencies to identify areas in need of  improvement, GAO internal control standards state that agencies should  establish and monitor performance measures and indicators.  Accordingly, agencies should compare actual performance data against  expected goals and analyze the differences.

		Eligibility Determinations

To determine individuals’ eligibility for the subsidy, SSA largely relies on  an automated process. After an individual applies, income and resource  data provided by the applicant are electronically compared to income data  provided by IRS and other agencies to determine if the individual meets  income and resource requirements. In cases where there are conflicting  data or questions regarding the data, SSA field office staff follow up with  individuals to address such matters. SSA tracks the number of eligibility  determinations it makes, the outcome of those determinations, and the  length of time for completing the determinations. SSA also tracks data on  denials, and periodically conducts samples to examine the reasons for  such actions. Although the subsidy did not become available until January  2006, SSA began processing applications in July 2005 to encourage people  to take advantage of the benefit when it became available.
As of March 2007, approximately 6.2 million individuals had applied for the  subsidy. SSA officials noted that the heaviest volumes occurred when the  public outreach campaign was most active. Figure 3 provides data on the  cumulative number of subsidy applicants and approvals from November  2005, when SSA began tracking the data, to December 2006.
Of the approximately 6.2 million individuals who had applied for the  subsidy as of March 2007, SSA approved 2.2 million, denied 2.6 million,  determined that no decision was required for 1.4 million, and had  decisions pending for 80,000 applicants. According to SSA officials, those  requiring no decision were the result of duplicate applications,  applications from individuals automatically qualified for the subsidy, or  canceled applications. To identify reasons for subsidy denials, SSA  conducted three separate studies that sampled a total of 1,326 denied  claims. These studies showed that most of applicants were denied due to  resources or income that exceeded allowable limits set by the MMA   (fig. 4). SSA officials stated that they plan to conduct a longitudinal study  to examine the reasons for all cases in which applicants were denied   the subsidy.
While SSA has captured data on the length of time it takes to make  eligibility determinations since it began accepting applications for the  subsidy in July 2005, it did not develop the capability to report the data,  and did not establish a performance goal for processing times until March  2007. As a result, SSA did not have the management information that it  needed to monitor its performance in this area and identify areas where  improvements were needed. SSA has now established a goal of processing  75 percent of subsidy applications in 60 days. In March 2007, SSA  provided us with information showing the percentage of subsidy  applications processed within certain periods of time, ranging from   30 days or less, to over 120 days. SSA’s data as of mid-March for calendar  year 2007 showed that of the approximately 213,000 applications received,  SSA had processed about 94 percent in 60 days or less, compared to nearly  91 percent of the approximately 1.3 million applications within the same  time frame for calendar year 2006.

		Appeals

Individuals may appeal denied subsidy determinations, as well as the level  of the subsidy, by calling SSA’s national toll-free number or calling,  writing, or visiting any Social Security field office. Individuals may also  complete an appeals form available on SSA’s Web site and mail it in to  SSA. Individuals have the choice of having their appeal conducted through  a telephone hearing or a case file review. To process appeals, SSA  established six Special Appeals Units. SSA tracks data on the total number  of appeals and the time it takes to process them, the method used to  resolve appeals, the reason for appeals, and the final disposition of  appeals. However, SSA does not currently have a performance goal to  assess the timeliness of its appeals decisions, and lacks the capability to  report this information. In follow-up with SSA officials on their comments  on a draft of this report, they told us that the agency is planning to  establish a goal of processing 75 percent of appeals in 60 days, but will  have to modify its system to report this information. SSA officials told us  that they have managed the appeals process by redirecting resources when  case-processing times for appeals exceed 60 days.
Regarding data on SSA’s appeals process, an SSA sample, conducted in  July 2006, showed that about 80 percent of individuals chose to have a  case file review. According to SSA data on appeals from August 2005 to  February 2007, it received about 79,000 appeals and completed about  76,000. The number of appeals was consistent with SSA’s initial estimate  that about 3 percent of denied subsidy applications would be appealed,  based on its experience with other programs. On the basis of an SSA  sample of 781 appeals, SSA reversed its decision for 57 percent of the  cases and upheld its decision for the remaining 43 percent.
SSA data show that the overall volume of appeals received was the highest  from November 2005 and July 2006, declined between August and  November 2006, and rose again between December 2006 and February  2007 (See table 3). During the decline, SSA closed all but one of its Special  Appeals Units by October 2006.
The time it took SSA to process appeals varied widely, and did not  necessarily decrease when the caseloads grew smaller. For example, SSA  appeals workload data showed that it took SSA an average of 80 days to  resolve approximately 11,600 appeals in April 2006, but took about 90 days  to resolve about 1,800 appeals in July 2006. SSA data from December 2006  through February 2007 also show that the agency’s processing time for  resolving appeals has not shown consistent improvement. For example, it  took SSA an average of 16 days to process 1,254 appeals in December  2006, but 42 days to process 2,463 appeals in February 2007. An SSA July  2006 sample of 781 appeals showed that 63 percent of appeals were filed  based on applicants’ challenges regarding an income issue, 24 percent  were based on applicants’ challenge regarding a resource issue, and   13 percent were based on other issues, such as an applicant’s failure to  respond to SSA requests for additional data in a timely manner. SSA  officials stated that the agency plans to broaden the sampling effort to  better understand the reasons for appeals.

		Redeterminations

According to the MMA and SSA regulations, all recipients of the low- income subsidy are required to have a redetermination of their eligibility  within 1 year after SSA first determines their eligibility. Future  redeterminations are required to be conducted at intervals determined by  the Commissioner. SSA’s regulations provide that these periodic  redeterminations be conducted based on the likelihood that an individual’s  situation may change in a way that affects subsidy eligibility. Additionally,  SSA’s regulations provide that unscheduled redeterminations may take  place at any time for individuals who report a change in their  circumstances, such as marriage or divorce. However, there is no specific  requirement that recipients report such changes. SSA tracks various  results from the redeterminations process, such as the number of  decisions made, and number and level of continued subsidies, but does not  track the amount of time needed to complete redetermination decisions.
SSA initiated its first cycle of redeterminations in August 2006, which  included all of the approximately 1.7 million individuals who were  determined to be eligible for the subsidy prior to April 30, 2006. SSA  excluded from the redeterminations process about 562,000 individuals  who were either deceased, automatically deemed eligible for the benefit  by CMS, or whose subsidy benefit had been terminated. As a result, SSA  sent approximately 1.2 million notices to inform individuals that their  continued eligibility status was being reviewed. The notice also provided  individuals with the income and resources data contained in SSA’s files  and asked them to notify SSA if the information had changed. SSA  subsequently sent 242,000 forms to beneficiaries who reported changes to  their income or resources, or whom SSA had identified as having such  changes from other sources, to allow them to indicate changes to the  information or dispute it. SSA data show that as of February 2007, SSA had  completed approximately 237,000 redeterminations. About 69,000  individuals remained at the same subsidy level, another 69,000 had a  change in their subsidy level, and 98,000 individuals had their subsidies  terminated, based on a change in their circumstances.
SSA does not track processing time for redetermination decisions and has  not established a performance time target for processing such actions.  SSA officials stated that since the redeterminations process is conducted  within a certain period of time, it is unnecessary to track the processing  time for individual redetermination decisions. However, as stated  previously, GAO internal control standards state that agencies should  establish performance measures for all activities and compare actual  performance against expected goals. Without such data, SSA will be  unable to identify areas in need of improvement.

	The Impact of the Subsidy Program Has Been Manageable

Although the subsidy program affected SSA’s workload and operations,  SSA officials said that the additional workload was manageable overall.  SSA hired a total of 2,200 field office staff to assist with subsidy  applications, as well as an additional 500 headquarters staff to support its  MMA activities. SSA officials stated that the agency’s major activities for  implementing low-income subsidy activities for fiscal year 2004 included  preparing public information materials for the subsidy, systems  development, and developing internal training materials for staff. Officials  also stated that major subsidy work activities for fiscal year 2005 included  hiring the approximately 2,200 field office staff, processing subsidy  applications, and establishing Special Appeals Units. For fiscal year 2006,  SSA provided us with data showing that staff spent the equivalent of  approximately 2,190 work years on low-income subsidy activities, with  almost 50 percent of the time used to process subsidy applications. These  activities included processing subsidy applications and resolving appeals,  and developing business process planning and systems development for  the redeterminations process.
SSA officials stated that the agency’s new responsibilities under the  subsidy program have not adversely affected its other workloads. In fact,  SSA officials pointed out that the processing times for other workloads  improved in fiscal years 2005 and 2006. For example, SSA exceeded its  goal of paying 83 percent of initial claims for retirement and survivor  benefits at the earliest point due, or 14 days after an applicant filed a  claim—the actual performance was approximately 85 and 87 percent,  respectively. Additionally, SSA exceeded its goal of paying 75 percent of  SSI claims for the elderly before their payment was due, or no more than  14 days after an applicant filed a claim—the actual performance was  approximately 85 and 88 percent, respectively.
Although SSA can track expenditures for implementing its various MMA  responsibilities overall, it cannot track expenditures related specifically to  low-income subsidy activities or other specific sublevel MMA activities.  For example, SSA cannot calculate the total amount of the $500 million  congressional appropriation it received for MMA start-up costs that was  spent on the subsidy program versus its other MMA responsibilities.  Although SSA could not provide documentation of the total amount of its  subsidy-related expenditures, it estimates that its costs related to the  subsidy program are about $175 million annually, based on workload  samples. However, SSA is planning to develop a tracking mechanism to  more accurately capture the data.
SSA officials attribute the light impact of the subsidy program to various  factors, including the automation of the subsidy application process and  the $500 million congressional appropriation it received for administrative  start-up costs to implement its MMA responsibilities. SSA officials also  told us that they were able to manage the other workloads because the  peak increases in subsidy applications and inquiries were short-lived,  allowing SSA’s operations to return to a more normal operating level after  handling these peak work volumes. SSA officials stated that they expect  small increases in its low-income subsidy workload during future  prescription drug plan open seasons, which typically have been held from  November to December.
SSA’s spending on its Medicare activities peaked in fiscal year 2005 (see  table 4) as supported by the $500 million congressional appropriation for  MMA start-up activities; more recent increases in such spending could  cause pressure on SSA’s other workloads in the future. The amount of  SSA’s administrative costs covered by the Medicare Trust Funds increased  by about 37 percent between fiscal year 2003 and estimated spending in  fiscal year 2008. The minimal impact of the subsidy workload and other  MMA activities through fiscal year 2006 was due, in part, to the   $500 million separately appropriated by the Congress. Now that the  additional $500 million is exhausted, SSA’s MMA responsibilities must  compete with all other workloads for resources within the overall  administrative appropriation limits. If the cost of SSA’s Medicare workload  increases, as it has done recently, SSA’s other workloads may experience  pressure if the overall administrative appropriation does not increase  proportionately.

	Conclusions

SSA has made progress in approving individuals for the low-income  subsidy, but has not established specific performance goals and measures  for its outreach activities. Without such goals and measures, SSA will not  have a means to assess the effectiveness of its efforts, or to identify areas  that require improvement as it moves forward. Having such goals and  measures takes on heightened importance now since SSA is conducting  outreach efforts on a more limited basis. Although no reliable data  currently exist on the population of individuals who might qualify for the  subsidy, SSA does not need such data to establish specific performance  goals and measures to assess its outreach efforts. For example, SSA could  set specific goals and measures to assess the effectiveness if its outreach  efforts for subpopulations where there is an underrepresentation of  subsidy applications. Monitoring the progress of such efforts could help  SSA to identify areas where increased outreach efforts are needed.
Assessing the performance of outreach efforts can also help SSA to make  more efficient use of staff resources by directing them to areas where  increased outreach efforts are needed to encourage applications among  underrepresented segments of the eligible population. While advocacy  groups have called for a more personalized outreach approach, such as  door-to-door contact, to encourage additional enrollments among  Medicare beneficiaries, it may be difficult for SSA to conduct such efforts,  given its resource limitations. Also, it is unclear how much more outreach  is needed, given the lack of reliable data on the eligible population. The  extent of additional outreach efforts will also depend on SSA’s ability to  more precisely identify remaining individuals eligible for the subsidy.  However, it is not clear to what extent additional taxpayer data from IRS  could help SSA to better target individuals potentially eligible for the  subsidy. Until an effort is undertaken to better determine the size of the  population that is eligible for the subsidy, it will be difficult for SSA and  others to assess its progress in approving individuals for the subsidy.
Finally, while SSA has considerable data on its subsidy application  processes, it lacks systematic performance indicators to compare results  to expected goals. Without processing time data for redetermination  decisions, and performance measures for all subsidy application  processes, SSA will not have the information that it needs to assess the  quality of the services it provides or to identify areas of improvement. The  importance of identifying people who could benefit from the subsidy,  coupled with ensuring a timely and reliable process for deciding initial  determinations, hearing appeals, and making redeterminations, is essential  to the success of the low-income subsidy.

	Recommendations for Executive Action

To improve SSA’s outreach efforts and its ability to measure the  effectiveness of the Medicare Part D low-income subsidy application  processes, we recommend that the Commissioner of Social Security:    establish specific performance goals and measures for SSA’s outreach  activities to provide the agency with a means to assess their  effectiveness in soliciting applications from additional individuals who  qualify for the subsidy, but have not yet applied, and    direct staff to begin collecting data on the processing time for  individual redetermination decisions, and establish performance  standards for processing time for the appeals and redetermination  decisions.
We also recommend that the Commissioners of SSA and IRS work  together to assess the extent to which IRS tax data may help SSA to better  target individuals who might qualify for the subsidy, possibly aiding SSA in  better targeting its outreach efforts. This effort could also aid in  developing more precise estimates of the eligible population and help to  better inform the Congress on legislative proposals to allow IRS to share  tax data with SSA to assist the agency with its outreach efforts.

	Agency Comments

We obtained written comments on a draft of this report from the  Commissioners of SSA and IRS. SSA agreed in theory with our  recommendation to develop a comprehensive plan, with specific  performance goals and measures, to detail the agency’s strategy for  encouraging individuals who qualify for the subsidy to apply. In its  response and in a follow-up discussion, SSA stated that it believes that its  National Strategic Communications Plan serves as a comprehensive plan  for its outreach efforts agencywide, but stated that it would not be able to  implement specific goals and measures due to the lack of reliable data on  the eligible population. We agree that SSA’s National Strategic  Communications Plan serves as a comprehensive plan for describing the  agency’s outreach efforts, and revised our recommendation accordingly.  However, we do not believe that data on the potentially eligible subsidy  population, while useful, are needed for SSA to establish specific  performance goals and measures to assess the effectiveness of its  outreach efforts.
SSA disagreed with our recommendation to begin collecting data on the  processing time for redetermination decisions, and establish performance  standards for processing times for appeals and individual redetermination  decisions. SSA stated that it monitors the time for completing the overall  redetermination cycle, which provides adequate management controls for  operational data. On the basis of GAO’s internal control standards, we  believe that SSA should measure the time for processing individual  redetermination decisions because it could provide the agency with  information on the efficiency of processing such decisions. While SSA  stated that it had established a performance standard for assessing the  timeliness of appeals, in a follow-up discussion with agency officials after  receiving their comments, they told us that the goal did not currently exist,  but that the agency is planning to establish a goal of processing   75 percents of appeals in 60 days. SSA officials added that the agency  would have to conduct additional programming to produce management  information for this data.
SSA agreed with our recommendation for the agency to work with IRS to  assess the extent to which IRS tax data may help SSA to better identify  individuals who might qualify for the subsidy. SSA stated that it has begun  discussions with IRS to evaluate how such a study might be designed. IRS  also agreed with this recommendation and stated that it is willing to work  with SSA in conducting such a study. IRS emphasized, however, that  current law prohibits the agency from sharing tax information, other than  in statistical form, before an individual applies for the subsidy. IRS also  discussed various limitations that could affect the usefulness of its tax  data. For example, IRS stated that its data may only be useful in screening  out individuals who do not qualify for the subsidy. In view of this, we  adjusted our recommendation to reflect that the study may assist SSA in  better targeting individuals who might qualify for the subsidy, rather than  identifying this population.
SSA’s comments are reproduced in appendix III, and IRS comments are  reproduced in appendix IV. Technical comments provided by each of these  agencies have been included in the report as appropriate.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  issue date. At that time, we will send copies of this report to the  Commissioner of SSA, the Secretary of HHS, the Commissioner of IRS, and  other interested parties. Copies will also be made available at no charge on  GAO’s Web site at http://www.gao.gov.
If you have questions concerning this report, please call me on (202)   512-7215. Contact points for our Offices of Congressional Relations and  Public Affairs, respectively, are Gloria Jarmon, who may be reached on  (202) 512-4470, and Paul Anderson, who may be reached on (202)   512-4800.

Appendix I: Objectives, Scope, and Methodology

To assess the Social Security Administration’s (SSA) implementation of  the Medicare Part D low-income subsidy, we reviewed the Medicare  Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) to  understand SSA’s responsibilities under the law. We also reviewed various  policies and regulations SSA established to carry out its new  responsibilities, as well as guidance provided to field office staff to assist  them in answering questions about the subsidy and taking subsidy  applications. We obtained information on SSA’s implementation activities  from SSA officials in the agency’s headquarters in Baltimore, Maryland,  and in two regional offices, and from management and staff in eight SSA  field office locations in Texas, Maryland, Virginia, and Pennsylvania. We  selected SSA offices in those states because of the large number of subsidy  applications that had been mailed to individuals who were potentially  eligible for the subsidy. In addition, we selected SSA offices in  Pennsylvania and Texas in particular because they had counties  (Philadelphia County in Pennsylvania and Dallas and Fort Worth Counties  in Texas) that had the most low-income subsidy applicants as of June  2006. To understand state Medicaid agencies’ responsibilities for  administering the subsidy, we reviewed regulations provided to these  agencies from the Department of Health and Human Service’s (HHS)  Centers for Medicare and Medicaid Services (CMS). In addition, we  discussed views on SSA’s implementation actions and feedback that had  been received from clients on the subsidy with state Medicaid agency  officials in Colorado, Kansas, Utah, Pennsylvania, and Texas. We selected  state Medicaid offices in Colorado, Kansas, Pennsylvania, and Utah  because they had established processes to make low-income subsidy  determinations. We also selected the Colorado and Kansas state Medicaid  agencies because we wanted to gain the perspectives of state officials that  had made low-income subsidy determinations. We visited the Texas state  Medicaid agency to gain the perspective of a state that had not yet set up  such a process, but had plans to do so in the future. We also interviewed  state Health Insurance program officials in Pennsylvania and Texas, and  officials from six advocacy groups, including the Access to Benefits  Coalition, the Health Assistance Partnership of Families USA, and the  Henry J. Kaiser Family Foundation. To obtain a contextual framework of  concerns surrounding the subsidy and issues that could affect its  implementation, we reviewed reports from GAO, the Congressional  Research Service, the Office of Inspector General of HHS, and various  reports from advocacy groups representing the elderly and disabled,  whom the subsidy was primarily designed to benefit.
To assess SSA’s progress in identifying individuals potentially eligible for  the subsidy, we discussed the methodology the agency used to target this  population with SSA Medicare Task Force officials responsible for  implementing the subsidy program; we also discussed with them the  agency’s overall outreach strategy and obtained and reviewed supporting  documentation. In particular, we discussed in detail how SSA developed  the approximately 18.6 million population of individuals to whom it  targeted its original mass mailing of subsidy material, as well as how it  more narrowly targeted groups within that population. We reviewed SSA’s  target population by looking at the number of total Medicare recipients  and estimates of the total eligible population developed by the  Congressional Budget Office, CMS, and others. We also met with Internal  Revenue Service (IRS) officials to discuss the data restriction, and  concerns officials would have if the law were changed to grant SSA access  to IRS data for better targeting outreach efforts. To understand SSA’s  efforts to solicit subsidy applications, we discussed with SSA officials the  process used to develop subsidy outreach materials and cognitive tests  that had been conducted to ensure that the materials were written at an  appropriate educational level for the target population. We discussed  SSA’s outreach methodology with officials from CMS, state Medicaid  agencies, and various advocacy groups. Additionally, we discussed and  obtained supporting documentation of training provided to field office  staff on the subsidy and discussed with staff the usefulness of the training.
To review SSA’s subsidy application processes—making eligibility  determinations, resolving appeals, and redetermining individuals’  continued subsidy eligibility—we reviewed the laws and regulations  relating to each of these processes and SSA’s strategic plan for relevant  performance goals and measures. Specifically for the subsidy eligibility  determinations process, we reviewed monthly data on the total number of  subsidy determinations. For applicants that had been denied the subsidy,  we obtained and reviewed available data on the reasons for the decisions.  We requested SSA data on the timeliness of the eligibility determinations,  but were told that while SSA captured the data in its Medicare  Applications System, it had only recently developed the business  requirement to report the data. Regarding SSA’s appeals resolution  process, we reviewed three SSA studies on samples of appeals identifying  the reasons for the appeals and the final disposition of the appeal. We also  reviewed SSA data on the total number of appeals filed and the length of  time for resolving them. Regarding the redeterminations process, we  reviewed data on the number of determinations conducted during the first  cycle in 2006 and the statistics on the results. We discussed with SSA  officials the actions that it planned to take to provide information on these  processes, as well as SSA’s plans for developing performance goals and  measures for these processes. On the basis of electronic data provided to  us, we were generally able to verify some data on the processing time for  eligibility determinations. However, we did not have all of the information  needed to verify the validity of other data.
To determine the impact that subsidy work activities had on SSA  operations, we discussed the issue with SSA headquarters officials and  field office managers and staff. In particular, we obtained and reviewed  SSA estimates of the resources the agency would need to implement the  low-income subsidy and discussed with SSA officials the mechanisms for  assessing the program’s impact. We also coordinated with another GAO  team that is reviewing how SSA spent the $500 million appropriation for  implementing all of the agency’s responsibilities under the MMA. In  addition, we reviewed SSA’s methods for tracking financial expenditures  and staff time dedicated to Part D activities. We also discussed with SSA  the implications of possible budget restrictions and reductions in carrying  out its Part D work. Finally, we reviewed SSA budget documents and  spending on the Medicare Trust Fund from fiscal year 2003 to fiscal year  2008.
We conducted our work between May 2006 and April 2007 in accordance  with generally accepted government auditing standards.

Appendix II: Subsidy Application Mailings by State, May 27, 2005–August 10, 2005

Appendix III: Comments from the Social Security Administration

Appendix IV: Comments from the Internal Revenue Service

Appendix V: GAO Contact and Staff Acknowledgments

	Acknowledgments

The following team members made key contributions to this report:   Blake Ainsworth, Assistant Director; Jeff Bernstein; Kyle Browning;  Susannah Compton; Mary Crenshaw; Rosamond Katz; Sheila McCoy;   Lisa Reynolds; Vanessa Taylor; and Paul Wright.

Related GAO Products

Medicare Part D: Challenges in Enrolling New Dual-Eligible  Beneficiaries. GAO-07-272. Washington, D.C.: May 4, 2007.
Prescription Drugs: An Overview of Approaches to Negotiate Drug Prices  Used by Other Countries and U.S. Private Payers and Federal Programs.  GAO-07-358T. Washington, D.C.: January 11, 2007.
Medicare Part D: Prescription Drug Plan Sponsor Call Center Responses  Were Prompt, but Not Consistently Accurate and Complete. GAO-06-710.  Washington, D.C.: June 30, 2006.
Medicare: Communications to Beneficiaries on the Prescription Drug  Benefit Could Be Improved. GAO-06-654. Washington, D.C.: May 3, 2006.
Social Security Administration: Medicare Part D Subsidies.   GAO-06-344R. Washington, D.C.: January 13, 2006.
Medicare: Contingency Plans to Address Potential Problems with the  Transition of Dual-Eligible Beneficiaries from Medicaid to Medicare  Drug Coverage. GAO-06-278R. Washington, D.C.: December 16, 2005.
Medicare: CMS’s Beneficiary Education and Outreach Efforts for the  Medicare Prescription Drug Prescription Drug Discount Card and  Transitional Assistance Program. GAO-06-139R. Washington, D.C.:  November 18, 2005.
Medicare: CMS’s Implementation and Oversight of the Medicare  Prescription Drug Discount Card and Transitional Assistance Program.  GAO-06-78R. Washington, D.C.: October 28, 2005.
Retiree Health Benefits: Options for Employment-Based Prescription  Drug Benefits under the Medicare Modernization Act. GAO-05-205.  Washington, D.C.: February 14, 2005.
Medicare Savings Programs: Results of Social Security Administration’s  2002 Outreach to Low-Income Beneficiaries. GAO-04-363. Washington,  D.C.: March 26, 2004.

Summary:
Why GAO Did This Study

Congress passed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), which created a Part D outpatient prescription drug benefit that enables Medicare beneficiaries to enroll in competing private drug coverage plans. The benefit also offers a subsidy administered by the Social Security Administration (SSA) to assist certain low-income Medicare beneficiaries with out-of-pocket costs. GAO was asked to review (1) SSA's progress in identifying and soliciting applications from individuals potentially eligible for the subsidy; (2) SSA's processes for making eligibility determinations, resolving appeals, and redetermining beneficiaries' eligibility; and (3) how the subsidy has affected SSA's workload and operations. To conduct this study, GAO reviewed the law, assessed subsidy data, and interviewed SSA and other officials.

What GAO Found

SSA approved about 2.2 million Medicare beneficiaries for the low-income subsidy as of March 2007, despite barriers it faced in identifying the eligible population and soliciting applications; however, measuring the success of SSA's outreach efforts is difficult because there are no reliable data on the size of the eligible population. In 2005, SSA mailed 18.6 million subsidy applications to Medicare beneficiaries who were potentially eligible for the subsidy. SSA knew that this mailing was an overestimate, but took this approach to ensure that all who were eligible would be contacted. SSA had hoped to more specifically identify the eligible population using IRS tax data, but current law restricts the use of taxpayer data unless an individual has already applied for the subsidy. Further, SSA conducted a campaign of about 76,000 events held nationwide to educate people about the subsidy and how to apply for it. Since the initial campaign ended, however, SSA has not developed specific performance goals and measures to assess the progress of its continuing outreach efforts. SSA's efforts to solicit applications were hindered by beneficiaries' confusion about the difference between the subsidy and the Medicare Part D prescription drug plan, and the reluctance of some individuals to share personal financial information, among other factors. While the early subsidy participation rate compares favorably to those of some other low-income programs, the lack of reliable data on the size of the eligible population means that the extent to which SSA has signed up the eligible population for the benefit is unknown. While SSA has established processes for making subsidy eligibility determinations, resolving appeals, and conducting redeterminations, it has not established some key management tools to monitor the progress of all of its efforts, as specified in GAO's internal control standards. For example, while SSA tracks various results from its appeals process, it does not currently have a performance goal to assess the timeliness of appeals decisions, but agency officials told us that SSA plans to establish a goal of processing 75 percent of appeals in 60 days. Also, while SSA tracks the status of its redetermination decisions, officials do not believe that it is necessary to measure the time for processing individual redetermination decisions because they said that the time to complete the overall redeterminations cycle provides adequate information. SSA's implementation of the low-income subsidy did affect the agency's workload and operations, but according to SSA officials, the additional workloadhas been manageable overall as a result of increased funding that the agency received to carry out MMA activities. SSA hired 2,200 field office staff, and 500 headquarters staff to handle its new subsidy workload, as well as to carry out other activities for the program. In 2006, SSA staff spent the equivalent of 2,190 work years on low-income subsidy implementation activities, with about 50 percent of the time spent on subsidy applications. While there were periods of high subsidy application activity, SSA officials told us that subsidy program activities did not have an adverse impact on other SSA workloads. The officials attributed the minimal impact of Part D to several factors, including the highly automated subsidy application process and the $500 million congressional appropriation that SSA spent on MMA start-up costs. SSA estimates that its costs for low-income subsidy activities are $175 million annually.