United States Government Accountability Office

GAO Report to the Committee on Finance, 

U.S. Senate 

MEDICARE PART D 

LOW-INCOME 

SUBSIDY 

Additional Efforts 

Would Help Social 

Security Improve 

Outreach and Measure 

Program Effects 

May 2007 

 

GAO-07-555 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 2007

MEDICARE PART D LOW-INCOME 

SUBSIDY 

Additional Efforts Would Help Social 

Security Improve Outreach and Measure 

Program Effects 

Highlights of GAO-07-555, a report to the 

Committee on Finance, U.S. Senate 

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 Recommends

GAO recommends that SSA 

develop specific performance goals 

and measures for its outreach 

activities, develop key management

tools for its appeals and

redetermination decisions, and also

that SSA and the Internal Revenue

Service (IRS) work together to

assess the extent to which taxpayer 

data could help to better target 

individuals who might qualify for

the subsidy. IRS generally agreed

with our recommendation, and SSA

generally agreed with all but one of 

our recommendations. 

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 workload

has 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. 

www.gao.gov/cgi-bin/getrpt?GAO-07-555.

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 

bovbjergbj@gao.gov. 
Contents 

Letter 1

Results in Brief 3 

Background 5

SSA Has Made Progress in Approving Subsidy Applicants, despite 

Barriers That Hindered Its Outreach Efforts, but Measuring Its 

Success Is Difficult 13 

SSA’s Processes for Determining Applicants’ Subsidy Eligibility, 

Resolving Appeals, and Redetermining Eligibility Lack Key Tools 

for Monitoring Performance 20 

The Impact of the Subsidy Program Has Been Manageable 27 

Conclusions 29

Recommendations for Executive Action 30 

Agency Comments 31 

Appendix I Objectives, Scope, and Methodology 33 

Appendix II Subsidy Application Mailings by State, May 27, 

2005–August 10, 2005 36 

Appendix III Comments from the Social Security Administration 38 

Appendix IV Comments from the Internal Revenue Service 42 

Appendix V GAO Contact and Staff Acknowledgments 44 

Related GAO Products 45 

Page i GAO-07-555 Medicare Part D Low-Income Subsidy
Tables 

Table 1: Part D Low-Income Subsidy Eligibility and Benefits, by 

Beneficiary Group, 2007 10 

Table 2: Medicare Part D Low-Income Subsidy Estimates of the 

Eligible Population Who Must Apply to Receive the 

Subsidy 19

Table 3: SSA Appeals Workloads, August 2005–February 2007 25 

Table 4: SSA’s Outlays Covered by the Medicare Trust Funds, 

Fiscal Years 2003-2008 29 

Figures 

Figure 1: Flow of Low-Income Subsidy Information 7 

Figure 2: Total Number of SSA Outreach Events from May 2005 to 

August 2006 14 

Figure 3: Cumulative Number of Subsidy Applicants and Approvals, 

November 2005 to December 2006 22 

Figure 4: Reasons for Subsidy Denials Based on SSA’s Sampling of 

Denied Claims 23 

Abbreviations 

CMS Centers for Medicare and Medicaid Services 

FPL federal poverty level 

HHS Department of Health and Human Services 

IRS Internal Revenue Service 

MMA Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 

PDP prescription drug plan 

SSA Social Security Administration 

SSI Supplemental Security Income 

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Page ii GAO-07-555 Medicare Part D Low-Income Subsidy
United States Government Accountability Office

Washington, DC 20548 

May 31, 2007

The Honorable Max Baucus 

Chairman 

The Honorable Charles E. Grassley 

Ranking Member 

Committee on Finance 

United States Senate 

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. According to 

recent studies, 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, which created a 

voluntary outpatient prescription drug benefit (Medicare Part D).1 The 

benefit, which became available in January 2006, enables Medicare 

beneficiaries to enroll in drug plans sponsored by private companies. A 

key element of the prescription drug benefit is the low-income subsidy, or 

“extra help,” available to Medicare beneficiaries with limited incomes and 

resources to assist them in paying their premiums and other out-ofpockets costs. 

While the MMA assigned the majority of the responsibilities for 

implementing Medicare Part D prescription drug program to the 

Department of Health and Human Services and its Centers for Medicare 

and Medicaid Services (CMS), it charged the Social Security

Administration (SSA) with administering the low-income subsidy. In this 

capacity, SSA is responsible for conducting outreach efforts to identify 

and notify individuals of the availability of the subsidy, making subsidy 

eligibility determinations, resolving appeals, and conducting 

redeterminations of beneficiaries’ continued subsidy eligibility. SSA is also 

responsible for withholding Part D premiums from monthly Social 

Security benefits for beneficiaries who select this option. You asked us to

review (1) the progress that SSA has made in identifying and soliciting 

applications from individuals potentially eligible for the low-income 

 1

Pub. L. 108-173. 

Page 1 GAO-07-555 Medicare Part D Low-Income Subsidy
subsidy; (2) the processes that SSA uses to make eligibility determinations, 

resolve appeals, and conduct redeterminations for the subsidy; and (3) the 

impact that the subsidy had on SSA’s workload and other operations. 

To conduct our work, we interviewed and obtained documentation from 

SSA headquarters officials responsible for implementing the low-income 

subsidy. We also obtained and discussed relevant documentation on SSA’s 

outreach strategy, efforts to target outreach for the low-income 

population, and methods for obtaining input from state Medicaid agencies 

in Colorado, Kansas, Pennsylvania, Texas, and Utah. We interviewed 

officials in the Colorado, Kansas, Pennsylvania, and Utah state Medicaid 

agencies because they had established processes to make 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 so in the future. We reviewed available documentation on 

SSA’s processes for making eligibility determinations, resolving appeals, 

and making redeterminations. While we were generally able to verify some 

data on the processing time for eligibility determinations, based on 

electronic data provided to us, we did not have all the information needed 

to verify the validity of other data. We also interviewed SSA management 

and staff in eight SSA field offices in Maryland, Virginia, Pennsylvania, and 

Texas to obtain their views on the implementation, as well as client 

feedback they received regarding the subsidy application process. We 

selected SSA offices in those states because of the large number of subsidy 

applications that had been mailed to individuals potentially eligible for the 

subsidy. We visited SSA offices in Pennsylvania and Texas in particular 

because counties in these states had the most applicants for the subsidy as

of June 2006. We interviewed CMS officials and obtained available 

documentation on the agency’s involvement with SSA’s outreach efforts. 

We also interviewed officials at the Internal Revenue Service (IRS) 

concerning legal restrictions on its ability to release tax data to SSA for the 

purposes of determining the population eligible for the subsidy and their 

concerns if these restrictions were lifted. We also 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. In addition, we interviewed officials in the five state Medicaid 

offices discussed earlier and two state health insurance programs 

(Pennsylvania and Texas) to obtain information on their efforts in 

assisting clients in applying for the subsidy and their perspectives on SSA’s

implementation efforts. We conducted our work from May 2006 through

April 2007 in accordance with generally accepted government auditing 

standards. Appendix I provides a more detailed description of our scope 

and methodology. 

Page 2 GAO-07-555 Medicare Part D Low-Income Subsidy
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 from them; however, the success of SSA’s outreach efforts is 

uncertain because there are no reliable data on the eligible population. 

Because of the lack of reliable data on the eligible population, SSA 

identified 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 to ensure that everyone who might qualify for the 

subsidy was notified of the benefit and had an opportunity to apply for it. 

SSA developed the 18.6 million estimate by using its benefit records and 

data from other government sources. SSA officials had hoped to use 

Internal Revenue Service (IRS) tax data to identify the eligible population, 

but the law prohibits the use of the data unless an individual has already 

applied for the subsidy. SSA followed this mailing with phone calls and 

additional targeted mailings. Further, SSA conducted an outreach 

campaign of 76,000 events held nationwide. Since the initial campaign 

ended, however, SSA has not developed specific performance goals and 

measures to assess the progress of its outreach efforts. Besides being 

hindered by barriers to identifying individuals potentially eligible for the 

subsidy, SSA’s solicitation efforts 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. The early subsidy 

participation rate compares favorably to those of some other low-income 

programs, but the extent to which SSA has been successful in signing up 

the eligible population is unknown because there are no reliable data on

the size of the target population. 

Results in Brief 

SSA has established application processes for determining low-income 

subsidy eligibility, reviewing appeals and conducting redeterminations; 

however, it has not established some key management tools to monitor the 

progress of all of its efforts. GAO internal controls standards state that 

establishing performance measures that compare actual performance 

against expected goals is needed to monitor the effectiveness of a 

program. To assess its low-income subsidy eligibility process, SSA has 

tracked the progress of the approximately 6.2 million subsidy 

determinations since it began processing applications in July 2005, but did 

not have goals for measuring the processing time for these applications 

until March 2007. SSA’s goal is now to process 75 percent of the subsidy 

applications in 60 days. In three separate studies since October 2005, SSA

has sampled 10 percent of its appeals to determine the reasons for them. 

Page 3 GAO-07-555 Medicare Part D Low-Income Subsidy
SSA has also tracked the amount of time for resolving appeals since 

August 2005. SSA data showed that in July 2006, the agency took 91 days 

to decide 1,795 appeals, while in February 2007, SSA took 42 days to 

decide 2,463 appeals. Although SSA tracks processing time for appeals, 

it currently has no performance goal to assess the timeliness of appeals 

decisions, and lacks the capability to report the information. Agency 

officials told us, however, that SSA plans to establish a goal of processing 

75 percent of appeals in 60 days—similar to its goal for processing subsidy 

applications--but will have to modify its system to produce performance 

information. Further, while SSA tracked the status of 1.2 million 

redeterminations of subsidy eligibility, SSA does not measure the amount 

of time it takes to process individual redetermination decisions and has no

plans to develop such information because officials stated that measuring 

the time for completing 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 

work has been manageable overall because of the increased funding the 

agency received to carry out MMA start-up activities and other factors. 

SSA hired 2,200 field office staff and 500 headquarters staff to handle the 

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 the 

low-income subsidy activities, with about 50 percent of the time spent on 

subsidy applications. SSA currently estimates the amount of time that staff 

spend on low-income subsidy activities through periodic sampling. 

However, SSA is working to implement a new tracking mechanism by 2010 

to more accurately capture all program data, including data related to the 

MMA. 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. For example, in fiscal years 2005 and 

2006, SSA exceeded its goal of making timely payments on initial 

retirement and survivor claims. 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 lowincome subsidy activities are $175 million annually. 

This report contains recommendations to the SSA Commissioner that are 

intended to help the agency better assess its subsidy outreach efforts, and 

the results of its appeals and redetermination processes. The report also 

contains a recommendation to the Commissioners of SSA and IRS for the 

agencies to work together to assess the extent to which IRS data could

Page 4 GAO-07-555 Medicare Part D Low-Income Subsidy
help SSA to better target individuals who might qualify for the subsidy, and 

to develop more precise estimates of the eligible population. In its 

comments on a draft of this report, SSA generally agreed with our 

recommendation to develop a comprehensive plan with specific goals and 

measures to direct and monitor the performance of its outreach efforts. In

its comments and a follow-up discussion, SSA officials told us that they 

believed that the agency’s National Strategic Communications Plan served

as a comprehensive plan for its outreach strategy, and shared their 

concerns about setting specific goals and measures for outreach efforts in 

the absence of reliable data on the population of individuals who might 

qualify for the subsidy. SSA disagreed with our recommendation to begin 

collecting data on the processing time for individual redetermination 

decisions, and establish performance goals for assessing the timeliness of 

individual redetermination and appeals decisions, and explained the basis 

for its position. SSA and IRS agreed with our recommendation that the two 

agencies work together to assess the extent to which IRS tax data may 

help SSA to better identify individuals who might qualify for the subsidy. 

However, IRS pointed out various limitations that might affect the 

usefulness of the data, and stated that its data can only help SSA to better 

target the individuals who may qualify for the subsidy. See appendix III for 

a copy of SSA’s comments, and appendix IV for a copy of IRS’s comments. 

SSA and IRS also provided a number of technical comments, which we 

incorporated as appropriate. 

The enactment of the MMA in December 2003 added a voluntary 

outpatient prescription drug benefit to the Medicare program, known as 

Medicare Part D.2

 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 

Background 

 2

Medicare is a health insurance program for people 65 years of age or older, people under 

age 65 who meet certain disability requirements, and people of all ages with end-stage renal 

disease (permanent kidney failure requiring dialysis or a kidney transplant). There are

currently over 43 million Medicare beneficiaries. 

Page 5 GAO-07-555 Medicare Part D Low-Income Subsidy
subsidy, individuals enrolled in Part D would have to pay greater out-ofpocket 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.3

 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. 

 3

In addition to Part D, MMA gave SSA various new responsibilities, which include, among 

others, (1) outreach regarding the Drug Discount Card that was temporarily effective 

before the prescription drug plans and the subsidy program took effect, (2) implementing 

Medicare Part B income-based premiums for beneficiaries with income above a stipulated 

level, and (3) premium withholding for Medicare Part C (e.g., Medicare Advantage plans). 

Page 6 GAO-07-555 Medicare Part D Low-Income Subsidy
Figure 1: Flow of Low-Income Subsidy Information 

State Medicaid agencies

• use Medicare eligibility data from 

 CMS to match against their own 

 Medicaid eligibility files

• compile comprehensive files

 identifying all dual-eligible 

beneficiaries and send to CMS

Pharmacies

• bill prescriptions to assigned PDP

Beneficiaries

To pay their premiums, 

beneficiaries make direct 

payments to PDPs, or have 

payments made through 

premium withholding

from Social Security benefits

Prescription Drug Plans (PDP)

• process enrollments and assign standard

billing information, and send this to CMS

• mail out ID cards and PDP information

 to enrolled beneficiaries

Sources: GAO analysis of SSA data; images (Art Explosion).

CMS

• matches state information on dual eligible population 

against its data on Medicare eligibility and deems

 them subsidy eligible

• matches SSI beneficiaries against their Medicare 

 enrollment records and deems them subsidy eligible 

• sends information to SSA on dual eligibles that are 

automatically enrolled in the subsidy

• sends information to state Medicaid agencies of

 individuals’ Medicare eligibility

• enrolls dual eligibles who have not already selected a

 prescription drug plan

• sends information on all subsidy eligible individuals to 

 prescription drug plans

• forwards beneficiary requests for premium 

 withholdings to SSA, and

• transfers premiums collected by SSA to appropriate 

 prescription drug plans

SSA

• sends information on individuals approved for the 

subsidy and their subsidy level to CMS

• sends eligibility data to CMS daily on SSI beneficiaries

 with Medicare 

• collects premiums from monthly benefits for 

beneficiaries who select this option and transfers the 

 withheld premiums to CMS

Page 7 GAO-07-555 Medicare Part D Low-Income Subsidy
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.4

 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 lowincome 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,5

 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.” 

 4

Generally, individuals who meet certain criteria and who are eligible for Social Security or 

Railroad Retirement benefits 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 premium. Medicare also offers optional

insurance under Supplementary Medical Insurance (Part B) to cover doctor’s services and 

outpatient care, and requires a premium. 

5

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.

Page 8 GAO-07-555 Medicare Part D Low-Income Subsidy
• Partial-benefit dual eligibles: These are Medicare beneficiaries who 

qualify for more limited Medicaid coverage, SSI, or state Medicare 

Savings Programs.6 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.7

 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. 

 6

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 Medicare Part A and Part B deductibles and coinsurance. 

7

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 9 GAO-07-555 Medicare Part D Low-Income Subsidy
Table 1: Part D Low-Income Subsidy Eligibility and Benefits, by Beneficiary Group, 2007 

Type of beneficiary IncomeaResourcesb

Monthly premium 

and annual

deductible Co-pay 

At or below 100 percent 

of the federal poverty 

level, (FPL) (at or below 

$10,210 for individuals or 

$13,690 for couples) 

Not applicablee0 premium and 

0 deductible 

$1/generic and $3.10/brand name 

drug; no co-pay after $3,850 in

annual out-of-pocket drug spending; 

no co-pay if institutionalized 

Full-benefit dual 

eligiblesc, d

Above 100 percent of 

FPL (above $10,210 for 

individuals or above 

$13,690 for couples) 

Not applicablee

0 premium and 

0 deductible 

$2.15/generic and $5.35/brand 

name drug; no co-pay after $3,850 

in annual out-of-pocket drug 

spending; no co-pay if 

institutionalized

Partial-benefit dual 

eligiblesf

 (participants in

a Medicare Savings 

Program or 

Supplemental Security 

Income (SSI) 

beneficiariesd

 ) 

Varies according to type 

of beneficiary. For 

Medicare Savings 

Program and SSI 

beneficiaries, income 

levels are set by income 

eligibility requirements for 

those programs. 

Not applicablee

 0 premium and 

0 deductible 

$2.15/generic and $5.35/brand 

name drug; no co-pay after $3,850 

in annual out-of-pocket drug 

spending 

Below $7,620 for 

individuals or 

$12,190 for couples 

0 premium and 

0 deductible 

$2.15/generic and $5.35/brand 

name drug; no co-pay after $3,850 

in annual out-of-pocket drug 

spending 

Below 135 percent of 

FPL (less than $13,784 

for individuals or $18,482 

for couples) 

Between $7,620 

and $11,710 for 

individuals, or 

between $12,190 

and $23,410 for 

couples 

0 premium and 

$53 deductible

15 percent co-pay between 

$54 and $3,850 in annual out of 

pocket spending; $2.15/generic and 

$5.35/brand name drug after $3,850 

in annual out-of-pocket drug 

spending 

Other subsidy-eligible 

beneficiaries 

Between 135 and 149 

percent of FPL (between

$13,784 and $15,315 for 

individuals or between 

$18,482 and $20,535 for 

couples) 

Below $11,710 for 

individuals or 

$23,410 for couples 

Sliding scale 

premium based on 

income and 

$53 deductible

15 percent co-pay between 

$54 and $3,850 in annual out-ofpocket spending; $2.15/generic and 

$5.35/brand name drug after $3,850 

in annual out-of pocket drug 

spending 

Medicare beneficiaries 

who are not eligible for 

the subsidyg

150 percent of FPL or 

more (above $15,315 for 

individuals or above 

$20,535 for couples) 

$11,710 or more for 

individuals or 

$23,410 or more for 

couples 

Variable premium, 

based on plan 

chosen, an 

average of $32 per 

month; $265 

deductible 

25 percent co-pay between $266 

and $2,400 in annual out-of-pocket 

spending; no benefit between

$2,400 and $3,850; 5 percent 

coinsurance or $2.15/generic and 

$5.35/brand name drug after $3,850 

in annual out-of-pocket drug 

spendingh

 

Source: GAO analysis of the MMA, as well as CMS and SSA regulations and guidance.

Page 10 GAO-07-555 Medicare Part D Low-Income Subsidy
a

The income limits shown above are those that apply to individuals with no dependents. If household 

members rely on the Medicare beneficiary or the spouse of the beneficiary for support, SSA uses the 

federal poverty levels based on household size. Also, if an applicant lives in Alaska or Hawaii, SSA 

applies the slightly higher poverty levels applicable to those states. 

b

These resource limits include $1,500 per person burial expenses for the individual and the spouse if 

there is one, and they live together. 

c

These individuals receive full Medicaid benefits. For all beneficiaries eligible for the full subsidy, 

premiums are 0 for those prescription drug plans that offer basic coverage at or below the standard

Part D premium. Beneficiaries may be eligible for the full subsidy amount, but still pay some portion of 

their premium if they enroll in a plan whose premium is above the appropriate threshold. In 2007 the 

National Average Part D Benchmark Premium is $27.35. 

d

Both of these groups are deemed eligible for the subsidy and are automatically signed up for it. 

Persons in the “other subsidy-eligible beneficiaries” group must apply to receive the subsidy. 

e

The MMA does not impose a resource test when determining whether individuals in these deemed 

groups qualify for the low-income subsidy. These beneficiaries, however, may be subject to a 

resource test in order to qualify for Medicaid or other benefit programs. 

f

Medicare Savings Program participants include Qualified Medicare Beneficiaries, Specified LowIncome Medicare Beneficiaries, and Qualifying Individuals. 

g

This group includes all nondeemed individuals who do not meet either the income or resource test, 

or both. 

h

This is the standard benefit package under Part D. Actual cost-sharing arrangements may vary by

plan. 

When Part D became available in January 2006, the prescription drug 

coverage provided under Medicaid for the estimated 6.2 million dual 

eligibles was transferred to Medicare Part D. To ensure that these 

individuals did not have a lapse in their drug coverage when the Part D 

benefit took effect in January 2006, CMS automatically enrolled them in a 

randomly selected Part D drug plan that was within established lowincome subsidy benchmarks. 8

 For the initial enrollment period, CMS also 

automatically enrolled beneficiaries who were identified as eligible for the

low-income subsidy, but had not selected a prescription drug plan by the 

May 15, 2006, deadline.9

 In January 2007, approximately 630,000 dual

eligibles, who were automatically receiving the subsidy in 2006, lost their

 8

CMS was required to automatically enroll in a Part D plan those full-benefit dual eligibles 

who failed to do so themselves. For purposes of ensuring a smooth transition to Part D

coverage, CMS notified those individuals that they would be enrolled in a particular plan

effective on a specified date, but provided them an opportunity to select a different plan or

to indicate that they did not wish to be enrolled in a plan. If individuals did not indicate that

they would select their own plan or opt out of Part D coverage within the time allotted in 

the notice, the plan selection made by CMS became effective. 

9

The deadline applied to all individuals who were first eligible to enroll in a Part D plan on 

or prior to January 31, 2006. Additional rules regarding enrollment periods are set forth in

CMS regulations, 42 C.F.R. § 423.38. 

Page 11 GAO-07-555 Medicare Part D Low-Income Subsidy
deemed status. These were people who lost their Medicaid, Medicare 

Savings Plan, or SSI coverage at some point during the year. To continue 

their subsidy eligibility, these individuals needed to apply for the subsidy 

or regain their deemed status. According to SSA, by mid-March 2007, 

approximately 100,000 of these beneficiaries had applied and been 

approved for the subsidy. 

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. 

Page 12 GAO-07-555 Medicare Part D Low-Income Subsidy
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. 

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 

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, 

despite Barriers Limiting 

Its Ability to Identify the 

Eligible Population and 

Solicit Applications

Page 13 GAO-07-555 Medicare Part D Low-Income Subsidy
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.

Figure 2: 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 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. 

Page 14 GAO-07-555 Medicare Part D Low-Income Subsidy
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.10

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. 

Barriers That Limited SSA’s 

Efforts in Identifying the 

Eligible Population 

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 

 10Under 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

IRS. 

Page 15 GAO-07-555 Medicare Part D Low-Income Subsidy
data to help the agencies more effectively identify beneficiaries potentially

eligible for the subsidy.11 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.12 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 

 11Department 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. 

12Individuals’ 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, whereas a married couple 65 or older,

filing jointly, was not required to file tax returns if their combined income was less than 

$18,900. 

Page 16 GAO-07-555 Medicare Part D Low-Income Subsidy
SSA to assist the agency in better identifying individuals who might be 

eligible for the subsidy. 

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. 

Barriers That Limited SSA’s 

Solicitation Efforts 

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 

Page 17 GAO-07-555 Medicare Part D Low-Income Subsidy
under the application’s perjury clause.

13 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.

 13The 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 18 GAO-07-555 Medicare Part D Low-Income Subsidy
Table 2: 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 approveda

“

(Column A)

SSA subsidy approvals 

as of as of March 2007 

(and estimated

participation rate) 

Column B) 

Eligible but have 

not yet applied

(Column A minus B)

Congressional Budget Officeb6.6 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 Servicese5.6 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, Washington, D.C.: July 2004. The data were projected for calendar 

year 2006. 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), Washington, D.C: 2005. The

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

in 2006. 

d

T. Rice and K. Desmond, 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. The authors 

estimated that a total of approximately 6.9 million eligible individuals would not be deemed, 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, “ Washington, D.C: January 30, 

2007. CMS estimated that an overall total of 13.2 million beneficiaries would be eligible in 2006. 

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

Page 19 GAO-07-555 Medicare Part D Low-Income Subsidy
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 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.14

Accordingly, agencies should compare actual performance data against 

expected goals and analyze the differences. 

SSA’s Processes for 

Determining 

Applicants’ Subsidy 

Eligibility, Resolving 

Appeals, and 

Redetermining 

Eligibility Lack Key 

Tools for Monitoring 

Performance 

 14GAO, Internal Control Standards: Internal Control Management and Evaluation Tool,

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

Page 20 GAO-07-555 Medicare Part D Low-Income Subsidy
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. 

Eligibility Determinations 

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.

Page 21 GAO-07-555 Medicare Part D Low-Income Subsidy
Figure 3: 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. 

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.15 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 

 15Canceled 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 22 GAO-07-555 Medicare Part D Low-Income Subsidy
to examine the reasons for all cases in which applicants were denied 

the subsidy.

Figure 4: Reasons for Subsidy Denials Based on SSA’s Sampling of Denied Claims 

8%

1%

47% 44%

Source: GAO analysis of SSA data.

Assets only (627)

Failure to cooperate with requests

for additional information (18)

Income only (582)

Assets and possibly income (99)

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.16 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.17 SSA’s data as of mid-March for calendar 

 16The 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 IRS data. 

17SSA measured the processing time for eligibility determinations from the date of the 

subsidy application or the date that the applicant became eligible for Medicare, whichever 

was later. 

Page 23 GAO-07-555 Medicare Part D Low-Income Subsidy
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. 

Page 24 GAO-07-555 Medicare Part D Low-Income Subsidy
Table 3: SSA Appeals Workloads, August 2005–February 2007 

Month 

Number of 

appeals received

Number of 

appeals processed

Average processing

time (in days)

August 2005 23 19 1.6

September 2005 422 253 2.5

October 2005 1,981 1,366 6.1

November 2005 7,443 2,498 11.3

December 2005 16,057 4,883 22.2

January 2006 13,023 4,543 40.0

February 2006 10,116 8,070 46.1

March 2006 8,714 12,614 68.2

April 2006 3,305 11,611 80.1

May 2006 3,467 10,221 88.3

June 2006 2,709 8,209 80.2

July 2006 1,913 1,795 90.5

August 2006 983 1,276 75.8

September 2006 613 1,836 58.7

October 2006 226 1,261 71.9

November 2006 689 935 48.6

December 2006 3,014 1,254 16.3

January 2007 2,603 1,209 25.6

February 2007 1,892 2,463 41.5

Source: SSA Appeals Workload Summary, as of February 27, 2007. 

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 

Page 25 GAO-07-555 Medicare Part D Low-Income Subsidy
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 lowincome subsidy are required to have a redetermination of their eligibility 

within 1 year after SSA first determines their eligibility.18 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. 

 18This does not include individuals who continue to be deemed or automatically eligible for 

the subsidy. Individuals who report certain 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 26 GAO-07-555 Medicare Part D Low-Income Subsidy
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. 

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. 

The Impact of the 

Subsidy Program Has 

Been Manageable 

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

Page 27 GAO-07-555 Medicare Part D Low-Income Subsidy
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. 

 

Page 28 GAO-07-555 Medicare Part D Low-Income Subsidy
Table 4: SSA’s Outlays Covered by the Medicare Trust Funds, Fiscal Years 2003-

2008

Dollars in millions 

Fiscal year 

Outlays, not

including the 

$500 million

congressional 

appropriation

Outlays from the 

$500 million

congressional 

appropriation

Total

outlays 

Percentage

increase in total 

outlays since 

fiscal year 2003

2003 $1,214.6 $0 $1,214.6 -

2004 1,184.0 53.9 1,237.9 1.9 %

2005 1,364.4 346.5 1,710.9 40.9 %

2006 1,568.8 111.4 1,680.2 38.3 %

2007 (estimate) 1,600.1 0 1,600.1 31.7 %

2008 (request) 1,661.5 0 1,661.5 36.8 %

Totals $8,593.4 $ 511.8a$9,105.2b-

Source: Social Security Administration, “Budget Justification for Appropriations Committees,” fiscal years 2005, 2006, 2007, and 2008.

Note: The $500 million appropriation for MMA start-up costs was available for fiscal years 2004 to 

2006 only. 

a

SSA officials stated that outlays appear to exceed the $500 million appropriation due to the funds

being outlayed, recovered, and then outlayed again in subsequent years. 

b

The increase in Medicare spending occurred despite the transfer of the Medicare appeals processing 

function from SSA to CMS in 2005. 

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. 

Conclusions 

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 

Page 29 GAO-07-555 Medicare Part D Low-Income Subsidy
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. 

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: 

Recommendations for 

Executive Action 

• 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 

Page 30 GAO-07-555 Medicare Part D Low-Income Subsidy
better inform the Congress on legislative proposals to allow IRS to share 

tax data with SSA to assist the agency with its outreach efforts. 

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. 

Agency Comments 

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 

Page 31 GAO-07-555 Medicare Part D Low-Income Subsidy
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. 

Barbara D. Bovbjerg 

Director, Education, Workforce, 

and Income Security Issues 

Page 32 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

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 

Page 33 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix I: Objectives, Scope, and 

Methodology 

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

Page 34 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix I: Objectives, Scope, and 

Methodology 

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. 

Page 35 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix II: Subsidy Application Mailings by

State, May 27, 2005–August 10, 2005

State Number of mailings 

Alabama 343,448

Alaska 27,384 

Arizona 363,084

Arkansas 237,524

California 1,614,086

Colorado 249,901

Connecticut 212,346

Delaware 54,086

District of Columbia 29,282 

Florida 1,434,108

Georgia 479,699

Hawaii 99,611 

Idaho 89,457 

Illinois 769,394 

Indiana 426,956

Iowa 251,207 

Kansas 195,899

Kentucky 325,571

Louisiana 290,073

Maine 115,475 

Maryland 332,418

Massachusetts 398,717

Michigan 658,889

Minnesota 312,476

Mississippi 186,890

Missouri 439,898

Montana 75,544

Nebraska 125,809

Nevada 137,367

New Hampshire 87,690 

New Jersey 500,519 

New Mexico 122,958 

New York 1,136,243 

North Carolina 637,564 

North Dakota 53,037 

Ohio 872,963 

Appendix II: Subsidy Application Mailings by 

State, May 27, 2005–August 10, 2005 

Page 36 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix II: Subsidy Application Mailings by

State, May 27, 2005–August 10, 2005

Oklahoma 265,009

Oregon 250,344

Pennsylvania 994,908

Rhode Island 75,955 

South Carolina 315,913 

South Dakota 64,853 

Tennessee 381,972

Texas 1,069,524

Utah 96,433 

Vermont 48,985

Virginia 469,428

Washington 362,295

West Virginia 176,397 

Wisconsin 382,047

Wyoming 34,698

Total: 18,676,334 

Source: Social Security Administration. 

Page 37 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix III: Comments from the Social Appendix III: Comments from the Social Security Administration 

Security Administration 

Page 38 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix III: Comments from the Social 

Security Administration 

Page 39 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix III: Comments from the Social 

Security Administration 

Page 40 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix III: Comments from the Social 

Security Administration 

Page 41 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix IV: Comments from the Internal Appendix IV Revenue Service : Comments from the Internal 

Revenue Service 

Page 42 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix IV: Comments from the Internal 

Revenue Service 

Page 43 GAO-07-555 Medicare Part D Low-Income Subsidy
Appendix V: 

A

GAO Contact and Staff 

cknowledgments 

Page 44 GAO-07-555

Appendix V: GAO Contact and Staff 

Acknowledgments 

Barbara D. Bovbjerg (202) 512-7215 or bovbjergb@gao.gov

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.

GAO Contact 

Acknowledgments 

Medicare Part D Low-Income Subsidy
Related GAO Products 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. 

(130580) Page 45 GAO-07-555 Medicare Part D Low-Income Subsidy
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Order by Mail or Phone 

To Report Fraud,

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

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