United States Government Accountability Office

GAO Testimony before the Senate Committee 

on Finance

MEDICARE PART D 

LOW-INCOME SUBSIDY 

Progress Made in Approving 

Applications, but Ability to 

Identify Remaining 

Individuals Is Limited 

Statement of Barbara Bovbjerg, Director 

Education, Workforce, and Income Security Issues 

For Release on Delivery

Expected at 10:00 a.m. EDT 

Tuesday, May 8, 2007 

 

GAO-07-858T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 8, 2007

MEDICARE PART D LOW-INCOME 

SUBSIDY 

Progress Made in Approving 

Applications, but Ability to Identify 

Remaining Individuals Is Limited 

Highlights of GAO-07-858T, a testimony 

before the Senate Committee on Finance 

To help the elderly and disabled 

with prescription drug costs, the 

Congress passed the Medicare

Prescription Drug, Improvement,

and Modernization Act (MMA) of 

2003, which created a voluntary 

outpatient prescription drug

benefit (Medicare Part D). A key 

element of the prescription drug

benefit is the low-income subsidy, 

or “extra help,” available to 

Medicare beneficiaries with limited

income and resources to assist 

them in paying their premiums and

other out-of-pocket costs.

To assess Social Security 

Administration’s (SSA) 

implementation of the Medicare

Part D low-income subsidy, GAO 

was asked to review (1) the

progress that SSA has made in

identifying and soliciting

applications from individuals 

potentially eligible for the lowincome subsidy, and (2) the 

processes that SSA uses to track its 

progress in administering the

subsidy. 

This statement is drawn from

GAO’s ongoing study for the 

committee on the Medicare Part D 

low-income subsidy, which is 

expected to be published at the end 

of May. To conduct this work, GAO

reviewed the law, assessed subsidy

data, and interviewed officials from 

SSA, the Centers for Medicare and

Medicaid Services, the Internal

Revenue Service, state Medicaid

agencies, and advocacy groups. 

SSA approved approximately 2.2 million Medicare beneficiaries for the lowincome subsidy as of March 2007, despite barriers that limited its ability to 

identify individuals who were eligible for the subsidy and solicit applications 

from them. However, the success of SSA’s outreach efforts is uncertain 

because there are no reliable data to identify the eligible population. SSA 

officials had hoped to use Internal Revenue Service (IRS) tax data to identify 

the eligible population, but the law prohibits the use of such data unless an 

individual has already applied for the subsidy. Even if SSA could use the 

data, IRS officials question its usefulness. Instead, SSA used income records 

and other government data to identify 18.6 million Medicare beneficiaries 

who might qualify for the subsidy, which was considered an overestimate of 

the eligible population. SSA mailed low-income subsidy information and 

applications to these Medicare beneficiaries and conducted an outreach 

campaign of 76,000 events nationwide. However, since the initial campaign 

ended, SSA has not developed a comprehensive plan to distinctly identify its 

continuing outreach efforts apart from other agency activities. SSA’s efforts 

were hindered by beneficiaries’ confusion about the distinction between 

applying for the subsidy and signing up for the prescription drug benefit, and 

the reluctance of some potential applicants to share personal financial 

information, among other factors. 

SSA has collected data and established some goals to monitor its progress in 

administering the subsidy, but still lacks data and measurable goals in some 

key areas. While SSA tracks various subsidy application processes through 

its Medicare database, it has not established goals to monitor its 

performance for all application processes. For example, SSA tracks the time

for resolving appeals and the outcomes of its initial redeterminations of 

subsidy eligibility, but does not measure the amount of time it takes to 

process individual redetermination decisions. According to SSA officials, 

implementing the low-income subsidy was manageable overall due to 

increased funding for the outreach and application processes and did not 

significantly affect the agency’s workload and operations. 

GAO is considering recommendations for SSA to work with IRS to assess the 

extent to which taxpayer data could help identify individuals who might 

qualify for the subsidy, and help improve estimates of the eligible population; 

and for SSA to develop a plan to guide its continuing outreach efforts and 

develop key management tools to measure the results of its subsidy 

application processes. 

www.gao.gov/cgi-bin/getrpt?GAO-07-858T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Barbara 

Bovbjerg at (202) 512-7215 or 

bovbjergb@gao.gov. 
May 8, 2007

Mr. Chairman and Members of the Committee: 

I am pleased to be here to discuss the Social Security Administration’s 

(SSA) progress in approving individuals for the Medicare Part D lowincome subsidy. High prescription drug costs can have a detrimental effect 

on low-income seniors and the disabled, who are more likely than others 

to suffer from chronic medical problems requiring prescription drugs. 

Such high costs may cause some elderly patients to forgo or restrict their 

use of prescription drugs. To help the elderly and disabled with these 

costs, the Congress passed the Medicare Prescription Drug, Improvement, 

and Modernization Act (MMA) of 2003.1

 MMA enabled Medicare 

beneficiaries to enroll voluntarily in drug plans sponsored by private 

companies. The benefit includes a low-income subsidy, or “extra help,” to 

assist Medicare beneficiaries with limited income and resources in paying

their premiums and other out-of-pocket costs. 

The Department of Health and Human Services (HHS) and its Centers for 

Medicare and Medicaid Services (CMS) is largely responsible for 

implementing the new drug benefit, called Medicare Part D, and SSA is 

responsible for administering the low-income subsidy. Accordingly, SSA is

responsible for notifying individuals of the subsidy’s availability, taking

applications, making subsidy eligibility determinations, resolving appeals, 

and ensuring continued subsidy eligibility. SSA also withholds Part D 

premiums from Social Security benefits for beneficiaries who select this 

option. To assess SSA’s implementation of the Part D low-income subsidy, 

you asked us to review (1) the progress that SSA has made in identifying 

and soliciting applications from individuals potentially eligible for the lowincome subsidy and (2) the processes that SSA uses to track its progress in 

administering the subsidy benefit. 

My written statement is drawn from our ongoing work for the committee 

on the Part D low-income subsidy, for which we expect to provide you a 

report at the end of May. We have provided SSA and the Internal Revenue

Service (IRS) with a draft copy of our report, and agency officials are in 

the process of preparing their comments. To conduct our work, we 

interviewed and obtained documentation from officials responsible for 

implementing the subsidy at SSA headquarters and at eight SSA field 

 1

Pub. L. 108-173. 

Page 1 GAO-07-858T 
offices in Maryland, Virginia, Pennsylvania, and Texas. We also obtained 

and discussed relevant documentation on SSA’s outreach efforts to target 

the low-income population and methods for obtaining input from state 

Medicaid agencies. We reviewed available data on SSA’s processes for 

making eligibility determinations, resolving appeals, and making 

redeterminations, but were unable to verify the reliability of the data. We 

interviewed CMS officials and obtained documentation on the agency’s 

involvement with SSA’s outreach efforts. We interviewed officials at the

IRS concerning legal restrictions on its ability to release tax data to SSA. 

We met with various advocacy groups that represent low-income and 

disabled beneficiaries to obtain their perspectives on SSA’s 

implementation of the low-income subsidy. We conducted our work from

May 2006 through April 2007 in accordance with generally accepted 

government auditing standards. 

In summary, SSA approved approximately 2.2 million Medicare 

beneficiaries for the low-income subsidy as of March 2007, despite barriers 

that limited its ability to identify individuals who were eligible for the 

subsidy and solicit applications. However, the success of SSA’s outreach

efforts is uncertain because there are no reliable data to identify the 

eligible population. SSA officials had hoped to use IRS tax data to identify 

the eligible population, but there are legal limits on IRS’s ability to release 

such data to SSA unless an individual has already applied for the subsidy. 

Even if SSA could use the data, IRS officials question their usefulness. 

Instead, SSA used income records and other government data to identify 

18.6 million Medicare beneficiaries who might qualify for the subsidy, 

which was considered an overestimate of the eligible population. SSA 

mailed low-income subsidy information and applications to the Medicare 

beneficiaries it identified, and conducted an outreach campaign of 76,000

events nationwide. However, since the initial campaign ended, SSA has not 

developed a comprehensive plan specific to its low-income subsidy 

outreach activities to guide its continuing efforts. SSA’s efforts were 

hindered by beneficiaries’ confusion about the distinction between 

applying for subsidy and signing up for the Medicare prescription drug 

benefit, and the reluctance of some potential applicants to share personal 

financial information, among other factors. 

Summary 

SSA has collected data and established some goals to monitor its progress 

in administering the subsidy, but still lacks data and measurable goals in 

some key areas. While SSA tracks various subsidy application processes 

through its Medicare database, it has not established goals to monitor its 

performance in all application processes. For example, SSA tracks the 

Page 2 GAO-07-858T 
time for resolving appeals and the outcomes of its initial redeterminations 

of subsidy eligibility, but does not measure the amount of time it takes to 

process individual redetermination decisions. According to SSA officials, 

implementing the low-income subsidy was manageable overall, due to 

increased funding for its MMA start up costs, and did not significantly 

affect the agency’s workload and operations. 

We are considering recommendations for SSA to work with IRS to assess 

the extent to which taxpayer data could help identify individuals who 

might qualify for the subsidy, and help improve estimates of the eligible

population; and for SSA to develop a plan to guide its continuing outreach

efforts and develop key management tools to measure the results of its 

subsidy application processes. 

All Medicare beneficiaries entitled to benefits under Medicare Part A or 

enrolled in Part B are eligible to enroll in Medicare Part D.2

 Medicare 

beneficiaries who qualify for full coverage under their state’s Medicaid 

program,3

 as well as Medicare beneficiaries who qualify for more limited 

Medicaid coverage, Supplemental Security Income (SSI), or state Medicare 

Savings Programs4

 are automatically enrolled in a prescription drug plan 

by CMS,5

 automatically qualify for the full subsidy of their premium and 

deductible, and do not need to file an application. They are referred to as

“deemed.” 

Background 

 2

Individuals who are eligible for Medicare automatically receive Hospital Insurance, known

as Part A, which helps pay for hospital stays, related post-hospital care, home health 

services, and hospice care, and typically does not require a monthly premium. Medicare 

also offers optional insurance under Supplementary Medical Insurance (Part B) to cover 

doctor’s services and outpatient care, and requires a premium. 

3

Medicaid is a federal and state program that helps pay medical costs for certain lowincome people, such as those who are 65 and older, the blind, the disabled, and members of 

families with dependent children or qualified pregnant women or children. Prior to the

effective date of Part D, Medicaid provided coverage for outpatient prescription drug costs 

for persons eligible for that program. 

4

Medicare Savings Programs are offered by state Medicaid agencies to assist people with 

limited income and resources with their Medicare premiums and, in some cases, may also

pay Part A and Part B deductibles and coinsurance. 

5

The automatic enrollment in the Part D prescription drug benefit only applies if 

beneficiaries do not enroll on their own. 

Page 3 GAO-07-858T 
Other Medicare beneficiaries who do not automatically qualify for the 

subsidy (i.e., who are not deemed) must apply and meet the income and 

resource requirements. These beneficiaries generally qualify if they have 

incomes below 150 percent of the federal poverty level and have limited 

resources. Generally, in 2007, individuals qualify if they have an income of 

less than $15,315 and have resources of less than $11,710; couples qualify

if they have a combined income of $20,535 and resources of $23,410.6

 The 

amount of the subsidy for premiums, deductibles, copayments, and 

catastrophic coverage varies, depending on income and resources. 

Subsidy benefits are provided to these individuals on a sliding scale, 

depending on their income and resources. 

Individuals generally apply for the benefit directly through SSA, although

they may also apply through their state Medicaid office. The agency that 

receives an application, whether SSA or a state Medicaid agency, is 

responsible for making initial subsidy determinations and deciding appeals 

and redeterminations. Those 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. Under the MMA, beneficiaries may also apply for the subsidy 

through their state Medicaid office. However, according to state Medicaid 

officials we spoke with, they encouraged beneficiaries to apply for the 

subsidy through SSA whenever possible. As of March 2007, only the 

Colorado and Kansas state Medicaid agencies had made Part D subsidy 

determinations. 

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, and the activities for other MMA 

responsibilities for fiscal years 2004 and 2005, but later extended the 

appropriation to fiscal year 2006. Since January 2006, SSA officials told us 

 6

The resource limits are based on three times the resource limit of the SSI program for

subsidy beneficiaries that qualify for the full subsidy in 2006, with subsequent limits 

updated each year based on the Consumer Price Index (CPI); for beneficiaries that qualify 

for less than the full subsidy, the resource limits are based on specific dollar amounts set in

the MMA, which are updated each year based on the CPI. Countable resources include 

such things as savings, investments, and real estate (other than an individual’s primary 

residence). Countable resources do not include such things as a car, a burial plot or limited 

funds set aside for burial expenses, or certain other personal possessions. 

Page 4 GAO-07-858T 
that the agency has had to draw on its overall administrative appropriation 

to support its Part D activities. 

SSA has approved 2.2 million applicants for the subsidy as of March 2007,

despite some barriers, but measuring their success is difficult because no 

reliable data are available to identify the eligible population. SSA officials 

told us that their outreach goal was to inform all individuals potentially 

eligible for the subsidy and provide them an opportunity to apply for the 

benefit. Because the agency lacked access to reliable data that might help

target their outreach efforts more narrowly, SSA used income records and

other government data to identify a broad group of potentially eligible

individuals. Outreach efforts were further limited by several barriers to 

soliciting applications. Since its initial outreach campaign, SSA has not 

developed a comprehensive plan to identify its continued outreach efforts 

apart from other activities. 

Progress Has Been 

Made in Approving 

Subsidy Applicants, 

despite Barriers, but 

Measuring Success Is 

Difficult 

SSA’s Initial Outreach 

Efforts Were Extensive, 

but Outreach Has since 

Decreased 

SSA conducted its initial outreach campaign from May 2005 to August 

2006, but has decreased its efforts since then. SSA sent targeted mailings, 

which included an application for the subsidy and instructions on how to 

apply, to the 18.6 million individuals it had identified as potentially eligible. 

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. SSA also conducted other follow up efforts, including sending 

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 79 years of age 

and older living in high-poverty areas; and individuals in Spanish-speaking,

Asian-American, and African-American households. 

The outreach efforts also included over 76,000 events conducted in 

collaboration with federal, state, and local partners, such as CMS, state 

Medicaid agencies, state health insurance programs, and advocacy groups 

for Medicare beneficiaries. Events were held at senior citizen centers, 

public housing authorities, churches, and other venues. As figure 1 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. 

Page 5 GAO-07-858T 
Figure 1: Total Number of SSA Outreach Events from May 2005 to August 2006 

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

13,500

15,000

April May June July Aug. Sept. Oct. Nov. Dec. Jan Feb. March April May June July Aug.

Number of events

Source: GAO analysis of SSA data.

2005 2006

Although the initial campaign has ended, SSA is continuing to solicit 

applications. For example, SSA has conducted various activities to inform 

individuals in rural and homeless communities about the subsidy, and is 

planning to launch a new strategy this week for Mother’s Day to inform 

relatives and caregivers—the sons, daughters, grandchildren and family 

friends---about the subsidy. SSA has incorporated its strategy for 

continuing outreach efforts for the subsidy into its National 

Communications Plan. However, it has not developed a comprehensive 

plan that specifically identifies those efforts separate from other agency 

activities. As a result, SSA has a limited basis for assessing its progress and 

identifying areas that require improvement. 

Page 6 GAO-07-858T 
SSA did not have access to data that might have helped to narrowly target 

the eligible population. Because of the lack of reliable data for identifying 

the entire population, SSA broadly targeted 18.6 million individuals who 

might be eligible for the subsidy. SSA identified the target population by 

using income data from various government sources to screen out 

Medicare beneficiaries whose income made them ineligible for the Part D 

subsidy. 7 SSA realized that using these data sources would result in an 

overestimate of the number of individuals who might qualify for the 

subsidy, because the data provided limited information on individuals’ 

resources or nonwage income. SSA officials said they took this approach 

to ensure that all Medicare beneficiaries who were identified as potentially

eligible for the subsidy were made aware of the benefit and had an 

opportunity to apply for it. 

Multiple Barriers Impeded 

SSA’s Outreach Efforts 

Data Issues Limited SSA’s 

Efforts to Identify the Eligible 

Population 

SSA officials said that they would have preferred to specifically target 

Medicare beneficiaries who were likely to be eligible for the subsidy by 

using tax data from IRS on individuals’ wage, interest, and pension 

income. Current law permits SSA to obtain income and resource data from 

IRS to assist in verifying income and resource data provided on subsidy 

applications.

8

 The law, however, prohibits IRS from sharing such data with 

SSA to assist with outreach efforts. According to SSA officials, such data

would allow SSA to identify individuals to target for more direct outreach

and to estimate how many individuals qualify for the subsidy. In November 

2006, the HHS Office of Inspector General reported that legislation is 

needed to provide SSA and CMS access to income tax data to help the 

 7

SSA obtained income data from its earnings records, as well as 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. 

8

Under 26 U.S.C. § 6103(1)(7)(C), IRS may only provide tax return information to SSA for

purposes of, and to the extent necessary in, determining the eligibility for or the correct

amount of benefits provided through the subsidy program. In signing the application form, 

individuals acknowledge that SSA will compare the information reported by them on the 

form to information supplied by federal, state, and local government agencies, including

the IRS. 

Page 7 GAO-07-858T 
agencies more effectively identify beneficiaries potentially eligible for the 

subsidy.9

SSA officials believe IRS income tax data could provide access to 

information on individuals’ income and resources. However, IRS officials 

told us that its data have many limitations. For example, IRS officials said 

that they have limited data on resources 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 resource level. Also, the 

officials said that many people with low incomes do not have incomes 

high enough to require them to file taxes, and therefore, IRS might not 

have information on them.

10 IRS also explained that its tax data would 

most likely identify individuals that would not qualify for the subsidy, 

rather than individuals that would qualify. Moreover, the IRS officials said 

that the data it would provide to SSA to determine eligibility could be 

almost 2 years old. For example, for subsidy applications filed in early 

2007, the last full year of tax data the IRS could provide would be for 2005.

Given these 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. No effort has been undertaken to determine 

the extent to which IRS data could help SSA 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. 

SSA’s efforts to solicit applications were hindered by beneficiaries’ 

confusion about applying for subsidy and the drug benefit. According to 

SSA field office staff and state Medicaid and advocacy group officials, 

many individuals were confused about the difference between the 

prescription drug benefit and the subsidy, and did not understand that 

they involved separate application processes. Consequently, some 

individuals thought that once they were approved for the subsidy, they 

Other Barriers Have Limited 

SSA’s Solicitation Efforts 

 9

Department of Health and Human Services, Office of Inspector General, Identifying 

Beneficiaries Eligible for the Medicare Part D Low-Income Subsidy. OEI-03-06-00120. 

Washington, D.C.: Nov. 17, 2006. 

10Individuals’ income, filing status, and age generally determine whether they must file an 

income tax return. For example, in 2006, single individuals 65 or older were not required to

file tax returns if their income was less than $9,700, and married couples 65 or older filing 

jointly were not required to file tax returns if their combined income was less than $18,900. 

Page 8 GAO-07-858T 
were also automatically enrolled in a prescription drug plan. Additionally, 

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.11

Though individuals have become more educated about the subsidy, 

concerns remain about eligibility requirements and the overall complexity 

of the application. SSA field office staff and advocacy group officials have 

concerns that the eligibility requirements set by the MMA may be a barrier. 

For example, they 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. Advocacy group officials have 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 they worked with various focus groups to 

develop the subsidy application and that they have revised the 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 

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 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, about 3.4 million to 4.7 

million individuals are eligible for the subsidy, but have not yet enrolled 

(See table 1.) In developing these estimates, however, these entities faced 

the same data limitations as SSA in identifying potentially eligible 

individuals.

 11The perjury clause states that an individual could face imprisonment or other penalties

for making a false or misleading statement about information provided on the subsidy 

application. 

Page 9 GAO-07-858T 
Table 1: Medicare Part D Low-Income Subsidy Estimates of the Eligible Population Who Must Apply to Receive the Subsidy 

(Numbers in millions) 

Source of estimate 

Eligible but not 

automatically enrolleda

(Column A)

SSA subsidy approvals 

as of as of March 2007 

(Column B) 

Eligible but not 

yet enrolled/current 

participation rate 

(Column A minus B)

Congressional Budget Officeb 6.6 2.2(33%) 4.4 

Access to Benefits Coalitionc6.8 2.2(32%) 4.6

Rice and Desmondd6.9 2.2(32%) 4.7

Centers for Medicare and 

Medicaid Servicese

5.6 2.2(39%) 3.4

Sources: 

a

We derived these numbers by subtracting the 7.6 million beneficiaries that CMS estimated in 

January 2007 were deemed for the subsidy, or had comparable coverage from other federal 

programs, from the sources’ original estimates of all eligible beneficiaries (except for the Rice and 

Desmond estimate, which included only undeemed beneficiaries). 

b

Congressional Budget Office (CBO), A Detailed Description of CBO’s Cost Estimate for the Medicare 

Prescription Drug Benefit, table 8, July 2004, Washington, D.C. CBO estimated that an overall total of 

14.2 million beneficiaries would be eligible for the subsidy in 2006. 

c

The Access to Benefits Coalition (Pathways to Success, page 1), 2005, Washington, D.C. The 

coalition estimated that an overall total of 14.4 million beneficiaries would be eligible for the subsidy in 

2006. 

d

Rice, T. and Desmond, K. January 2006. “Who Will Be Denied Medicare Prescription Drug Subsidies

Because of the Asset Test?” The American Journal of Managed Care. 12 (1), pp.46-54, January

2006. The authors estimated that a total of approximately 6.9 million eligible individuals would not be 

dual eligible beneficiaries, as of January 2006. 

e

Reported in CMS Press release, “Medicare Drug Plans Strong and Growing: Beneficiaries Compared 

Plans and Continued to Sign Up for Prescription Drug Coverage, “January 30, 2007, Washington, 

D.C. CMS estimated that an overall total of 13.2 million beneficiaries were eligible in 2006. 

SSA officials said that it is unfair to judge the success of its outreach 

efforts for the subsidy in relation to the estimates of the total eligible 

population, given the limitations in identifying it. SSA officials stated that 

their efforts have been successful in meeting their outreach goals. In fact,

after almost 2 years of implementation efforts, SSA’s participation rate 

compares favorably to that of the Food Stamp Program, which had a 

participation rate of 31 percent after its second year of implementation. 

The low-income subsidy participation rate compares less favorably, 

however, to that of the Supplemental Security Income program, which had 

a participation rate of approximately 50 percent among the aged a year 

after the program began. SSA officials noted that the SSI participation rate

included individuals who were automatically transferred from state 

government programs to SSI, which is somewhat similar to the “deemed” 

population that was automatically transferred to the low-income subsidy. 

Page 10 GAO-07-858T 
SSA has collected data and established some goals to monitor its progress 

in implementing and administering the subsidy benefit, but still lacks data

and measurable goals in some key areas. 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.12 Accordingly, agencies should compare actual performance 

data against expected goals and analyze the differences. 

Some of SSA’s

Application Processes 

and Operations Lack 

Key Tools for 

Monitoring 

Performance 

SSA Monitors Performance 

on Applications Processes, 

but Lacks Data and Goals 

on Others 

SSA monitors various aspects of its determination process, such as the 

number of applications received and their outcomes and length of 

processing, but did not establish a performance goal for processing times 

until March 2007. SSA largely relies on an automated process to determine 

individuals’ eligibility for the subsidy. 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. SSA field office staff follow up with individuals in 

cases where there are conflicting data or questions. SSA tracks the number 

of eligibility determinations, the outcome of those determinations, and the 

length of time for completing the determinations. SSA also tracks denials 

and periodically samples denied claims to examine the reasons for such 

actions. 

Determinations 

As of March 2007, approximately 6.2 million individuals had applied for the 

subsidy. SSA received the heaviest volume of applications when the public 

outreach campaign was the most active. Figure 2 provides data on the 

cumulative number of subsidy applicants and approvals from November 

2005, when SSA began tracking the data, to December 2006.

 12GAO, Internal Control Standards: Internal Control Management and Evaluation Tool,

GAO-01-1008G (Washington, D.C.: August 2001). 

Page 11 GAO-07-858T 
Figure 2: Cumulative Number of Subsidy Applicants and Approvals, November 2005 

to December 2006 

0

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

7.000.000

Nov. Dec. Jan. Feb. Mar. April May July. Oct. Dec.

Number of applicants and approvals

Source: GAO analysis of SSA data.

Month/year

2005 2006

Number of subsidy applicants

Number of number of approvals

Note: SSA did not have data available for the months of June, August, September, and November of

2006. 

While SSA has captured data on the length of time it takes to make 

eligibility determinations, it did not develop the capability to report the 

data, and did not establish a performance goal for processing times until 

March 2007. SSA has now established a goal of processing 75 percent of 

subsidy applications in 60 days.13 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, and had decisions pending for 

80,000 applicants. SSA officials determined that no decision was required 

for 1.4 million because they were duplicate applications, applications from 

individuals automatically qualified for the subsidy, or canceled

 13The processing time includes a built-in 20-day delay as part of the predecisional process

and the 10-14 days that it takes to receive verification data from IRS. 

Page 12 GAO-07-858T 
applications.

14 To identify reasons for subsidy denials, SSA conducted 

three separate studies that sampled a total of 1,326 denied claims. These 

studies showed that 47 percent of applicants were denied due to resources 

and 44 percent because of income that exceeded allowable limits set by 

the MMA. SSA officials stated that they plan to conduct a longitudinal 

study to examine the reasons for all denied claims. 

SSA tracks data on the total number of appeals, the reason for appeals, the 

time it takes to process them, the method used to resolve them, and their 

final disposition. Individuals may appeal denied claims, as well as the level 

of the subsidy, by calling SSA’s national toll-free number, submitting the 

request in writing, or visiting any Social Security field office. Individuals 

may also complete an appeals form available on SSA’s Web site and mail it 

to SSA. Individuals have the choice of having their appeal conducted 

through a telephone hearing or a case file review. According to SSA, about 

79,000, or 3 percent of denied subsidy applications were appealed from 

August 2005 to February 2007. SSA completed about 76,000 appeals in that

time frame. 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. 

Appeals 

SSA data show that the overall volume of appeals received was the highest 

between November 2005 and July 2006, declined between August and 

November 2006, and rose again between December 2006 and February 

2007. During the decline, SSA closed all but one of its six Special Appeals 

Units by October 2006. Further, the time it took SSA to process appeals 

varied widely, and did not necessarily decrease when the caseloads grew

smaller. 

SSA tracks various results from the redeterminations process, such as the 

number of decisions made, and number and level of continued subsidies. 

However, SSA does not track processing time for redetermination 

decisions and has not established a performance time target for processing 

such actions. According to the MMA and SSA regulations, all recipients of

the subsidy are required to have their eligibility redetermined within 1 year 

Redeterminations 

 14Canceled applications included applications that were withdrawn by the applicant or 

applications that were canceled by SSA because the applicant was not eligible for 

Medicare, as required to qualify for the subsidy. 

Page 13 GAO-07-858T 
after SSA first determines their eligibility.15 Future redeterminations are 

required to be conducted at intervals determined by the Commissioner. 

SSA’s regulations provide that these periodic redeterminations be 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. 

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. 

SSA initiated its first cycle of redeterminations in August 2006, which 

including 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. 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 Has Monitored Some 

Aspects of the Subsidy 

Program’s Impact on SSA’s

Workload, and Increased 

Funding Helped SSA 

Manage the Increased 

Workload

SSA has monitored some aspects of the increased workload and found 

that implementing the low-income subsidy was manageable overall, due to

increased funding for its MMA startup costs. Although the subsidy 

program affected SSA’s workload and operations, SSA officials told us that 

implementing the subsidy did not significantly affect the agency’s 

workload and operations. 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 attribute the light impact 

of the subsidy program to various factors, including the automation of the 

subsidy application process and the $500 million appropriation it received

for administrative startup costs to implement its MMA responsibilities. 

SSA officials pointed out that as they implemented the subsidy, the 

processing times for other workloads improved. Officials explained that

 15This does not include individuals who continue to be deemed or automatically eligible for 

the subsidy. Individuals who report changes to SSA regarding their benefit status are also 

excluded from the initial redetermination process since they are redetermined as a result of 

the change. 

Page 14 GAO-07-858T 
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 are typically held from November to December. 

Although SSA can track expenditures for implementing its various MMA 

responsibilities overall, it cannot track expenditures related specifically to

low-income subsidy activities. For example, SSA cannot calculate how 

much of the $500 million appropriation it received for MMA startup costs 

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 

administering the subsidy are about $175 million annually, based on 

workload samples. However, SSA is planning to develop a tracking 

mechanism to more accurately capture the data. 

Recent increases in SSA’s administrative resources may have also been a 

factor in limiting the impact of the subsidy program workload. The amount

of SSA’s administrative costs covered by the Medicare Trust Funds is 

projected to increase by about 37 percent between fiscal year 2003 and 

fiscal year 2008. This increase occurred despite the transfer of the 

Medicare appeals processing function from SSA to CMS in 2005. While this

increase has helped SSA to carry out its various Medicare responsibilities 

(such as taking applications for Medicare benefits and withholding 

Medicare premiums, among others), it may have also helped to cushion 

the impact of the subsidy program. 

Reaching the millions of people who are forgoing the government’s help in 

paying for their prescription drug benefit remains a significant challenge. 

Using the $500 million appropriation for its MMA start up costs, SSA was 

able to initiate the Part D subsidy and sign up 2 million people for the 

subsidy without adversely affecting SSA’s overall operations. However, 

while it is not clear how to reach the remaining eligible people, the 

momentum of the initial outreach campaign should not be lost. The 

barriers to identifying eligible people and convincing them to sign up 

remain. For some, the subsidy application is complicated, which is due in 

part to the low-income subsidy eligibility requirements. Further, no one 

has yet studied whether or not IRS data can help identification efforts. 

While advocacy groups have called for a more personalized outreach 

approach to encourage additional enrollments, it may be unrealistic to 

Conclusions 

Page 15 GAO-07-858T 
expect SSA to conduct such efforts, given its resource limitations. Both a 

better understanding of who is eligible and a plan for continued outreach

could help SSA make efficient use of limited staff resources by targeting 

outreach more narrowly to the eligible population.

Further, a timely and reliable process for deciding initial determinations, 

hearing appeals, and making redeterminations is essential to effective 

management of the subsidy. SSA has focused on developing and improving 

the processes for serving its customers in a timely manner. As SSA moves 

forward, it may need better information to ensure that the subsidy 

program serves its target population as efficiently and effectively as 

possible. 

We are considering recommendations for SSA to work with IRS to assess 

the extent to which taxpayer data could help identify individuals who 

might qualify for the subsidy, and help improve estimates of the eligible

population; and for SSA to develop a plan to guide its continuing outreach

efforts and develop key management tools to measure the results of its 

subsidy application processes. 

Mr. Chairman, this completes my prepared statement. I would be happy to

respond to any questions you or other members of the committee may 

have at this time. 

For further information regarding this testimony, please contact 

Barbara D. Bovbjerg, Director, Education, Workforce, and Income 

Security Issues, on (202) 512-7215. Blake Ainsworth, Jeff Bernstein, 

Mary Crenshaw, Lara L. Laufer, Sheila McCoy, Kate France Smiles, 

Charles Willson, and Paul Wright, also contributed to this statement. 

GAO Contacts and 

Staff 

Acknowledgments 

Page 16 GAO-07-858T 
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