Medicare Part D Low-Income Subsidy: SSA Continues to Approve Applicants, but Millions of Individuals Have Not Yet Applied
Published: 2008-05-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: To help the elderly and disabled with prescription drug costs, the Congress passed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), which created a voluntary outpatient prescription drug benefit (Medicare Part D). A key element of the prescription drug benefit is the low-income subsidy, or "extra help," available to Medicare beneficiaries with limited income and resources to assist them in paying their premiums and other out-of-pocket costs. To assess the Social Security Administration's (SSA) implementation of the subsidy, GAO is providing information on (1) the number of applicants approved for or denied the low-income subsidy and (2) challenges of identifying individuals eligible for the subsidy and targeting outreach efforts. This statement is based on a prior GAO report on the subsidy and associated spending issued in May 2007, selected aspects of which we updated in May 2008.
section_title: What GAO Found
paragraphs: Of the approximately 7.2 million applicants for the low-income subsidy, SSA approved approximately 2.8 million as of March 2008, and SSA has improved some key measures for its subsidy application processes. SSA approved about 570,000 applicants, denied about 403,000 applicants, and determined that no decision was required for about 281,000 applicants in fiscal year 2007. Excess income was the primary reason applicants were denied benefits, while many other applicants were denied benefits because their resources exceeded program limits. Further, SSA has collected data and established some goals to monitor its progress in implementing and administering the subsidy benefit. No reliable data are available to help SSA identify the eligible population for its outreach efforts, and millions who may be eligible have not yet applied. SSA maintains that it would not be able to establish specific goals and measures for its outreach activities, as we recommended in our May 2007 report because, of the lack of reliable data on the total eligible population. Responding to another of our recommendations, SSA is working with the Internal Revenue Service to determine if tax data can help target individuals eligible for the subsidy. The Centers for Medicare & Medicaid Services and the Congressional Budget Office have estimated, respectively, that about 2.6 million to over 4 million individuals who may qualify for the subsidy are not receiving it. Various barriers, such as reluctance to disclose personal financial information or lack of knowledge of the subsidy, may prevent potentially eligible Medicare beneficiaries from applying for the subsidy. To solicit applications from individuals potentially eligible for the subsidy, SSA conducted an extensive outreach campaign from May 2005 to August 2006, but has decreased its outreach activities since then. Staffing constraints in SSA field offices may also limit SSA's ability to assist individuals with the subsidy and conduct local outreach to inform the public about the subsidy.

section_title: Letter
paragraphs: I appreciate the opportunity to participate in today’s hearing to discuss the  Social Security Administration’s (SSA) progress in enrolling individuals in  the Medicare Part D Low-Income Subsidy. High prescription drug costs  can have a detrimental effect on low-income seniors and the disabled, who  are more likely than others to suffer from chronic medical problems  requiring prescription drugs. Such high costs may cause some elderly  patients to forgo or restrict their use of prescription drugs. To help the  elderly and disabled with these costs, the Congress passed the Medicare  Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).  MMA enabled Medicare beneficiaries to enroll voluntarily in drug plans  sponsored by private health insurance companies. The benefit includes a  low-income subsidy, or “extra help,” to assist Medicare beneficiaries with  limited income and resources (also called assets) in paying their premiums  and other out-of-pockets costs.
The Department of Health and Human Services and its Centers for  Medicare & Medicaid Services (CMS) are largely responsible for  implementing the new drug plan, called Medicare Part D, and SSA  administers the low-income subsidy. SSA is responsible for conducting  outreach efforts to identify and notify individuals of the subsidy’s  availability, taking applications, making subsidy eligibility determinations,  resolving appeals, and ensuring continued subsidy eligibility. SSA also  withholds Part D premiums from Social Security benefits for beneficiaries  who select this option. My testimony will address (1) the number of  applicants approved for or denied the low-income subsidy and (2) the  challenges of identifying individuals eligible for the subsidy and targeting  outreach efforts.
My comments are based largely on a prior GAO report issued in May 2007  addressing SSA’s implementation of the low-income subsidy and  associated spending. We updated selected aspects of the work during May  2008. We conducted our work in accordance with generally accepted  government auditing standards. Those standards require that we plan and  perform the audit to obtain sufficient, appropriate evidence to provide a  reasonable basis for our findings and conclusions based on audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: All Medicare beneficiaries entitled to benefits under Medicare Part A or  enrolled in Part B are eligible to enroll in Medicare Part D. Medicare  beneficiaries who qualify for full coverage under their state’s Medicaid  program, as well as Medicare beneficiaries who qualify for more limited  Medicaid coverage, Supplemental Security Income (SSI), or state Medicare  Savings Programs are automatically enrolled in a Part D prescription drug  plan by CMS, automatically qualify for the full subsidy of their premium  and deductible, and do not need to file an application. They are referred to  as “deemed.”
Other Medicare beneficiaries who do not automatically qualify for the  subsidy (i.e., who are not deemed) must apply and meet the income and  resource requirements. These beneficiaries generally qualify if they have  incomes below 150 percent of the federal poverty level and have limited  resources. Generally, in 2008, individuals qualify if they have an income up  to $15,600 for an individual and $21,000 for a couple and if they have  resources up to $11,990 for an individual or $23,970 for a couple. The  amount of the subsidy for premiums, deductibles, copayments, and  catastrophic coverage varies depending on income and resources.
Individuals generally apply for the benefit directly through SSA, although  they may also apply through their state Medicaid office. The agency that  receives an application, whether SSA or a state Medicaid agency, is  responsible for making initial subsidy determinations and deciding appeals  and redeterminations. Those who apply through SSA may submit their  subsidy application using SSA’s paper application or an Internet  application form. Applicants may also have their information entered  electronically by visiting an SSA field office or by calling SSA’s toll-free  phone line. According to state Medicaid officials we spoke with, they  encouraged beneficiaries to apply for the subsidy through SSA whenever  possible. As of March 2007, only the Colorado and Kansas state Medicaid  agencies had made Part D subsidy determinations.
Under the MMA, the Congress provided SSA with a special $500 million  appropriation from the Federal Hospital Insurance Trust Fund and the  Federal Supplementary Medical Insurance Trust Fund to assist SSA in  implementing its Part D responsibilities for fiscal years 2004 and 2005, but  later extended the appropriation to fiscal year 2006. Since January 2006,  SSA officials told us that the agency has had to draw on its overall  administrative appropriation to support its Part D activities. SSA informed  us that the agency now has a mechanism to track costs for low-income  subsidy applications, and estimates that it cost the agency $175 million to  administer the subsidy in fiscal year 2007, and that it expects similar costs  in fiscal year 2008.
section_title: SSA Continues to Approve Applications and Improve Processing Efforts and Has Improved Some Measures for Processing Benefits
paragraphs: SSA continues to approve low-income subsidy applications; of the  applicants who were denied benefits, most exceeded income limits and  others exceeded resource limits. To monitor its progress in implementing  and administering the subsidy benefit, SSA has collected key data and  established some goals.
subsections: section_title: Excess Income Was the Predominant Reason That Applicants Were Denied the Subsidy in Fiscal Year 2007
paragraphs: Of the approximately 7.2 million applicants filing for the subsidy as of  March 2008, SSA approved 2.8 million. SSA received 1.3 million new  applications in fiscal year 2007, approving approximately 570,000 (43  percent), denying approximately 403,000 (31 percent), and made no  decision for approximately 281,000 (22 percent) because applicants had  submitted duplicate applications among other reasons.
According to a recent SSA study of individuals who applied for the subsidy  in 2007 and where SSA made a decision by January 2008, SSA denied  approximately 416,000 applicants. The most common reasons for denials  were excessive income and resources. As Table 1 shows, excess income  was the primary reason for denials, and excess resources were the reason  in approximately 17 percent of the denials.
For denials based on excess income, about 10 percent of applicants were  within $500 of the income limit. About 98 percent of applicants with  excess income received Social Security benefits, and 35 percent received  pensions from sources other than veterans’ or Social Security benefits.  Table 2 shows the extent to which applicants were denied subsidy  eligibility because their income was too high. For those denied, the median  excess income was $4,572.
For denials based solely on excess resources, nearly 6 percent of  applicants were within $500 of the resource limit. Table 3 shows the extent  to which applicants were denied subsidy eligibility because their resources  were too great. For those denied, the median excess resources were  $13,690. Bank accounts and investments, which included stocks, bonds,  and individual retirement account balances were responsible for about 57  percent of the excess resource denials.
section_title: SSA Has Made Some Improvements for Measuring Subsidy Processes, but Lacks Measures in Certain Areas
paragraphs: We reported, in May 2007, that SSA had established application  processes for determining low-income subsidy eligibility, reviewing  appeals, and conducting redeterminations; however, it had not established  some key management tools to monitor progress of all of its efforts. To  enable agencies to identify areas in need of improvement, GAO internal  control standards state that agencies should establish and monitor  performance measures and indicators. Accordingly, agencies should  compare actual performance data against expected goals and analyze the  differences.
While SSA had tracked the progress of subsidy determinations since it  began processing applications in July 2005, it did not have goals for  measuring the processing time for these applications until March 2007.  SSA’s goal is to process 75 percent of the subsidy applications in 60 days  and reported that it processed 93 percent of determinations within 60 days  during the first 6 months of fiscal year 2008. SSA had also been tracking  the amount of time for resolving appeals of subsidy denials, but also did  not have a performance goal to assess the timeliness of appeals decisions.  In response to our recommendation, SSA established a goal of processing  75 percent of appeals within 60 days—similar to its goal for processing  subsidy applications. SSA reported that 74.5 percent of appeals were  processed in 60 days during the first 6 months of fiscal year 2008.
SSA tracks various results from the redeterminations process, such as the  number of decisions made, and the number and level of continued  subsidies. According to the MMA and SSA regulations, all recipients of the  subsidy are required to have their eligibility redetermined within one year  after SSA first determines their eligibility. Future redeterminations are  required to be conducted at intervals determined by the Commissioner.  SSA’s regulations provide that these periodic redeterminations be 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.  In May 2007, we recommended that SSA collect data on the processing  time for individual redetermination decisions, and establish performance  standards for such processing time. SSA disagreed with our  recommendation, stating that the agency monitors the time for completing  the overall redetermination cycle, providing adequate management  controls. While SSA still does not collect processing time data for  individual redetermination decisions, an SSA official recently told us that  it is now the agency’s goal to complete redetermination decisions before  the end of each year, except for people who do not respond to SSA’s  inquiries.
section_title: No Reliable Data Are Available to Identify Eligible Population for Outreach Efforts, and Millions May Have Not Yet Applied
paragraphs: No reliable data are available to help SSA identify the eligible population  for its outreach efforts, and millions who may be eligible have not yet  applied, in part due to privacy concerns and application complexity. SSA is  working with the Internal Revenue Service (IRS) to determine whether tax  data can help target individuals eligible for the subsidy.  According to  available estimates, millions of individuals who may qualify for the subsidy  have not yet applied. Various barriers, such as a reluctance to share  personal financial information, may discourage some individuals from  applying. Furthermore, SSA initially conducted a focused outreach  campaign, but now incorporates such efforts into its overall Social  Security outreach including work with third parties to publicize the  subsidy and targeted outreach events on Mother’s Day and Father’s Day.
subsections: section_title: SSA Does Not Have Data to Narrowly Target Eligible Population
paragraphs: SSA does not have access to data that might help it to narrowly target the  eligible population. In the absence of reliable data for identifying the  eligible population, in 2006 SSA broadly targeted 18.6 million individuals  who might be eligible for the subsidy, which was an overestimate. SSA  identified the target population by using income data from various  government sources to screen out Medicare beneficiaries whose income  made them ineligible for the Part D subsidy. SSA realized that using these  data sources would result in an overestimate of the number of individuals  who might qualify for the subsidy, because the data provided limited  information on individuals’ resources or nonwage income. SSA officials  said they took this approach to ensure that all Medicare beneficiaries who  were 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. Current law permits SSA to obtain income and asset data from  IRS to assist in verifying information provided on subsidy applications.  The law, however, prohibits IRS from sharing such data with SSA in the  absence of a submitted application. According to SSA officials, such data  would allow SSA to identify individuals to target outreach more directly  and to estimate how many individuals may qualify for the subsidy.  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 help SSA in  estimating an individual’s potential asset level. Given these limitation, IRS  officials stated that their tax data was more likely to identify individuals  who would not quality for the subsidy, rather than those who would. In  November 2006, the HHS Office of Inspector General reported that  legislation is needed to provide SSA and CMS access to income tax data to  help the agencies more effectively identify beneficiaries potentially eligible  for the subsidy.
In our May 2007 report, we recommended that SSA develop a  comprehensive plan, with specific performance goals and measures, to  detail the agency’s outreach strategy for enrolling additional individuals  who qualify for the subsidy. While SSA agreed with the recommendation in  theory, it maintains that it would be unable to implement specific goals  and measures due to the lack of reliable data on the eligible population.  SSA recently informed us that is still the agency’s position. We also  recommended that SSA and IRS work together to assess the extent to  which IRS tax data would help SSA to identify individuals who might  qualify for the subsidy, possibly aiding SSA in better targeting outreach  efforts. In implementing our recommendation, SSA provided IRS with a  random sample of 200,000 individuals (of approximately 19 million  potentially eligible) who might qualify for the subsidy. IRS then provided  SSA Form 1098 and 1099 data for these individuals, with identifying  information removed. SSA could then use its methodology for IRS to  estimate potential subsidy eligibility. The Form 1098 and 1099 information  will help SSA determine if individuals have pensions and resources that  exceed the subsidy threshold. IRS is expecting to complete its preliminary  analysis and share the information with SSA by the end of June 2008.
section_title: Millions of Eligible Individuals May Not Be Taking Advantage of the Subsidy
paragraphs: Millions of individuals potentially eligible for the low-income subsidy are  still not receiving it. Although no reliable data exist on the total eligible  population, CMS estimated that about 2.6 million individuals may be  eligible but not receiving the subsidy. Based on a 2004 Congressional  Budget Office (CBO) estimate, 4.4 million individuals may be eligible and  not receiving the subsidy.
Several barriers may prevent potentially eligible Medicare beneficiaries  from applying for the subsidy. In our May 2007 report, we stated that some  individuals were reluctant to apply because they did not want to share  their personal financial information for fear that an inadvertent error on  the application could subject them to prosecution under the application’s  perjury clause. However, in December 2007 SSA revised the clause  removing the threat of imprisonment for false statements. A  2007  Mathematica study conducted for AARP, also found that reluctance to  share personal financial information, the stigma associated with applying  for public benefits, and inadequate availability of one-on-one assistance  for completing the subsidy application, and resource limits affected  individuals’ decision not to apply for the subsidy. A CMS study also found  that individuals do not apply if they are currently not taking prescription  medications because they do not believe that they need the benefit and are  discouraged by the assumed high Part D drug costs.
section_title: SSA Initially Conducted Focused Outreach Efforts, But Now Incorporates Such Efforts into Overall Social Security Outreach
paragraphs: From the outset of the low-income subsidy program, SSA conducted a  broad outreach campaign to inform as many potentially eligible people as  possible about the subsidy and how to apply for it. SSA conducted its  initial outreach campaign from May 2005 to August 2006. To solicit subsidy  applications, SSA sent targeted mailings, which included an application for  the subsidy and instructions on how to apply, to 18.6 million individuals  identified as potentially eligible. SSA also conducted over 76,000 outreach  events in collaboration with federal, state, and local partners, such as  CMS, state Medicaid agencies, state health insurance programs, and  advocacy groups for Medicare beneficiaries, among other efforts. The  number of outreach events has declined, from a high of 12,150 in July 2005  to 230 at the completion of the campaign in August 2006.
Today, SSA continues to solicit applications, but through the agency’s  ongoing general outreach activities, working with third parties and special  targeted events around Mother’s Day and Father’s Day, though not through  a dedicated campaign. Current activities include mailing notices annually that include information about the low- income subsidy to low-income Medicare beneficiaries. mailing approximately 100,000 applications each month to  beneficiaries attaining initial Medicare eligibility after screening  them to determine that their income may be below 150 percent of  the federal poverty level.   including information on the subsidy in its Cost-of-Living  Adjustment letter sent each December to over 50 million Medicare  beneficiaries. developing new outreach material for capturing the attention of  Medicare beneficiaries regarding the subsidy. conducting a “Show Someone You Love How Much You Care”  campaign to inform relatives and caregivers about the low-income  subsidy. This campaign has focused on Mother’s Day and Father’s  Day in 2007 and 2008. using automated phone call technology to call potentially eligible  individuals to inform them about the subsidy. SSA field office staff  will call individuals who do not respond. This initiative will begin  in June 2008. using a new special pamphlet, designed with a mailer insert that is  placed at pharmacies, hospitals, and medical practices, to enable  Medicare beneficiaries to request a low-income subsidy application  without calling or visiting SSA.
Recent staffing reductions in field offices may have left SSA with limited  resources to assist individuals with the subsidy and conduct local  outreach efforts. With staffing reductions, much of SSA’s work is focused  on its core workload, which includes processing applications for Social  Security benefits and for Social Security numbers. Between 2005 and 2007,  field office staffing declined by 7.1 percent. We recently testified that this  staffing reduction may have increased customer waiting time in field  offices. Further, during the course of our recent study, several staff  reported that they often did not have adequate time to spend with  customers to explain information. Although SSA hired 2,200 new field  office staff to assist with the implementation of Medicare Part D, these  staff are now focused on the full range of field office workloads and are  therefore not available to specifically serve the needs of individuals  seeking assistance with the low-income subsidy.
Individuals responding to Mathematica’s 2007 study stated that the  availability of local SSA staff to help low-income subsidy applicants is  important because SSA staff may provide more personalized assistance  than staff in SSA’s Teleservice Centers, which operate the agency’s toll- free telephone service. However, many of the study respondents reported  long lines at crowded SSA field offices or difficulty getting through on  local field office telephone lines. Mathematica reported that several  respondents reported that SSA field offices were overwhelmed by people  seeking services other than the low-income subsidy. In our May 2008  testimony on SSA field offices, we also reported that staffing reductions  have adversely affected field offices’ ability to serve customers. In  particular, we reported that between 2002 and 2006, the average waiting  time for field office service increased by 40 percent from 15 minutes to 21  minutes, and in fiscal year 2007, more than 3 million customers waited for  over an hour to be served, according to SSA data. We also reported that  SSA’s 2007 Field Office Caller Survey found that 51 percent of customer  calls to 48 randomly selected field offices went unanswered.
section_title: Conclusions
paragraphs: Reaching the millions of people who are forgoing the government’s help in  paying for their prescription drug benefit remains a significant challenge.  While SSA continues to approve applications for the subsidy, the agency’s  efforts to attract new subsidy applicants have slowed significantly since  2006. CMS and CBO estimate, respectively, that about 2.6 million to over 4  million individuals who may be eligible for the subsidy are still not  receiving the benefit. It is not clear how to reach the remaining eligible  people, and the barriers to identifying them and convincing them to sign  up remain. While advocacy groups encourage a more personalized  outreach approach, it may be unrealistic to expect SSA to conduct such  efforts, given its resource limitations. The IRS and SSA study may help  determine if tax data could help identify individuals who may qualify for  the subsidy and target outreach efforts. A better understanding of who is  eligible could help SSA make more efficient use of limited staff resources  by targeting outreach more narrowly to the eligible population.
Mr. Chairman, this completes my prepared statement. I would be happy to  respond to any questions you or other members of the committee may  have at this time.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: For further information regarding this testimony, please contact Barbara  D. Bovbjerg, Director, Education, Workforce, and Income Security Issues,  on (202) 512-7215. Blake Ainsworth, Susannah Compton, Mary Crenshaw,   Matthew Lee, Lise Levie, Sheila McCoy, and Paul Wright also contributed  to this statement.
section_title: Related GAO Products
paragraphs: Social Security Administration Field Offices: Reduced Workforce Faces  Challenges as Baby Boomers Retire. GAO-08-737T. Washington, D.C.: May  8, 2008.
Social Security Administration: Policies and Procedures Were in Place  over MMA Spending, but Some Instances of Noncompliance Occurred.  GAO-07-986. Washington, D.C.: August 31, 2007.
Medicare Part D Low-Income Subsidy: Additional Efforts Would Help  Social Security Improve Outreach and Measure Program Effects. GAO- 07-555. Washington, D.C.: May 31, 2007.
Medicare Part D Low-Income Subsidy: Progress Made in Approving  Applications, but Ability to Identify Remaining Individuals Is Limited.  GAO-07-986. Washington, D.C.: May 8, 2007.
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.
This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.