Medicare Part D Low-Income Subsidy: Additional Efforts Would Help Social Security Improve Outreach and Measure Program Effects
Released: 2007-06-20T00:00:00

Letter

Background

The enactment of the MMA in December 2003 added a voluntary outpatient prescription drug benefit to the Medicare program, known as Medicare Part D. Prior to this, the Medicare program did not generally pay for outpatient drugs. The new Medicare Part D drug benefit, which became available in January 2006, enables Medicare beneficiaries to select among private drug plans sponsored by private companies. Beneficiaries who elect to enroll in a Part D plan are responsible for a monthly premium, which varies by the individual plan selected. A key element of the prescription drug benefit is the low-income subsidy, or “extra help,” available to low-income elderly and disabled individuals to assist them in paying their premiums, deductibles, and co-payments. Without the subsidy, individuals enrolled in Part D would have to pay greater out-of- pocket costs for their prescription medications.

While the Department of Health and Human Services’ CMS has responsibility for implementing the Part D prescription drug benefit, SSA is responsible for administering the subsidy. The MMA requires that SSA solicit and process subsidy applications to determine applicants’ eligibility, resolve appeals for applicants dissatisfied with their subsidy determinations, and periodically redetermine individuals’ continued eligibility. SSA transmits information on its approved subsidy determinations and individuals’ subsidy levels to CMS, which in turn transmits the information to the appropriate drug plan. CMS provides information to SSA and to prescription drug plans for individuals who automatically qualify for the subsidy and the Part D prescription drug benefit, based on information it receives from state Medicaid agencies on individuals’ eligibility for Medicaid and from SSA on individuals who receive Supplemental Security Income (SSI). SSA also withholds premium payments from the monthly Social Security checks of individuals who elect this payment option; otherwise, individuals make direct payments to their selected prescription drug plan. Figure 1 shows the flow of information among SSA, CMS, state Medicaid agencies, prescription drug plans, pharmacies, and beneficiaries.

To implement the new responsibilities under the MMA, SSA established a Medicare Planning and Implementation Task Force in December 2003. The objectives of the task force included determining the affected population; the number of staff, locations, and material resources needed; and agreeing on specific responsibilities with other federal government agencies. Under the MMA, the Congress provided SSA with a $500 million appropriation from the Federal Hospital Insurance Trust Fund and the Federal Supplementary Medical Insurance Trust Fund to pay for the initiation of SSA’s Part D responsibilities for fiscal years 2004 and 2005, but later extended the appropriation to fiscal year 2006. The appropriation was exhausted in fiscal year 2006, and MMA spending is now subject to SSA’s overall spending ceiling under the Limitation on Administrative Expenses appropriation.

Eligibility for the Medicare Part D Low-Income Subsidy

All Medicare beneficiaries entitled to benefits under Medicare Part A or enrolled in Part B are eligible to enroll in Medicare Part D. Some Medicare beneficiaries automatically qualify for the low-income subsidy, while others are required to apply for it and must meet the eligibility requirements established under the MMA. Those eligible for the subsidy generally fall into three broad categories (table 1 describes the Part D low- income subsidy associated with each category, as well as the costs for Medicare beneficiaries who do not qualify for the subsidy).

Full-benefit dual eligibles: These are low-income Medicare beneficiaries who qualify for full coverage under their state’s Medicaid program, which, prior to the effective date of Part D, provided coverage for their outpatient prescription drug costs. These individuals are automatically enrolled by CMS in the Part D prescription drug program. They automatically qualify for the full subsidy and do not need to file an application. These beneficiaries are referred to as “deemed.”

Partial-benefit dual eligibles: These are Medicare beneficiaries who qualify for more limited Medicaid coverage, SSI, or state Medicare Savings Programs. Similar to full-benefit dual eligibles, they are automatically enrolled in a Part D prescription drug plan by CMS. They also automatically qualify for the full subsidy and do not need to file an application. They are also referred to as “deemed.”

Other Medicare beneficiaries: Medicare beneficiaries who are not deemed eligible must apply and meet the income and resource requirements to receive the subsidy. These beneficiaries generally qualify if they have incomes below 150 percent of the federal poverty level and have limited resources. In addition to applying for the subsidy, these individuals must also apply to enroll in the Part D prescription drug plan. Low-income subsidy benefits are provided to these individuals on a sliding scale, depending on their income and resources.

Applying for the Subsidy

Medicare beneficiaries who do not automatically qualify for the Part D low-income subsidy can apply for the benefit directly through SSA or through their state Medicaid office. Individuals who apply through SSA may submit their subsidy application using SSA’s paper application or an Internet application form. Applicants may also have their information entered electronically by visiting an SSA field office or by calling SSA’s toll-free phone line. On the basis of applicant’s income and resource information, SSA issues a letter to inform the applicant of whether or not he or she has been approved for the subsidy. SSA sends a predecisional notice to applicants who appear to be ineligible for the subsidy based on the income and resource information they provided, and allows them 20 days to provide other information for the agency to consider. If applicants do not provide such information within the required time frame, SSA sends a final letter to inform them that they do not qualify for the subsidy. If an individual applies for the subsidy through SSA, SSA is responsible for resolving any subsequent appeals, and for redetermining the applicant’s continued subsidy eligibility.

As required by the MMA, beneficiaries may also apply for the subsidy through their state Medicaid office. However, according to state Medicaid officials we spoke with, they have encouraged beneficiaries to apply for the subsidy through SSA whenever possible. To prepare for those beneficiaries that request to have their subsidy applications processed by a state office, state Medicaid officials we spoke to said that they modified their Medicare Savings Program or Medicaid applications, when appropriate, to collect the necessary information for subsidy determinations. As of March 2007, only the Colorado and Kansas state Medicaid agencies have made Part D subsidy determinations. When state Medicaid agencies make subsidy determinations for individuals, they are also responsible for subsequent appeals and redetermination decisions.

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

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

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

Although SSA faced barriers in identifying the population eligible for the subsidy and soliciting applications from individuals, it had approved 2.2 million subsidy applicants as of March 2007. SSA conducted its initial outreach campaign from May 2005 to August 2006 to educate individuals about the subsidy and to help them apply for it. SSA officials told us that their outreach goals were to (1) ensure that as many individuals potentially eligible for the subsidy were informed of the benefit, (2) ensure that all potentially eligible Medicare beneficiaries had an opportunity to apply for the benefit, and (3) solicit 5 million subsidy applications over fiscal years 2005 and 2006 (SSA actually received 5.5 million applications during this time period). To accomplish these goals, SSA launched an outreach campaign that included over 76,000 events conducted in collaboration with various federal, state, and local partners, such as state Medicaid agencies, state health insurance programs, and various advocacy groups for Medicare beneficiaries. SSA carried out the campaign by requiring each of its field offices to conduct a certain number of outreach events. These events were held at senior citizen centers, public housing authorities, churches, pharmacies, and other venues. As figure 2 shows, the number of outreach events has declined significantly, from a high of 12,150 in July 2005 to 230 at the completion of the campaign in August 2006.

Although SSA’s initial outreach campaign has ended, SSA is continuing to conduct outreach efforts to solicit applications from individuals potentially eligible for the subsidy. For example, SSA has conducted various activities to increase subsidy applications from individuals in rural and homeless communities. SSA also recently launched a new strategy during the week of Mother’s Day to inform relatives and caregivers about the subsidy, and is planning a similar effort during Father’s Day. Additionally, SSA is targeting approximately 630,000 dual eligibles who lost their automatic eligibility for the subsidy to help them apply for the subsidy. While SSA has incorporated its strategy for continuing subsidy outreach efforts into its National Strategic Communications Plan, the plan does not contain specific performance goals and measures. As a result, SSA has no basis for assessing its progress and identifying areas that require improvement.

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

SSA initially targeted 18.6 million individuals who might be eligible for the subsidy, which was an overestimate of the eligible population. SSA took this approach because there were no reliable data on the size of the eligible population. SSA developed the targeted population to which to mail the subsidy applications by screening out Medicare beneficiaries whose income made them ineligible for the Part D subsidy using income data from its benefit records, as well as income data from the Office of Personnel Management, the Department of Veterans Affairs, the Railroad Retirement Board, and the Office of Child Support Enforcement of the Department of Health and Human Services (HHS). SSA realized that using these data sources would result in an overestimate of the number of individuals who might qualify for the subsidy. While the data provided information on individuals’ income, it provided limited information on individuals’ assets or nonwage income, which is needed to determine eligibility for the subsidy. Because of the lack of such information, SSA proceeded with a more generalized targeting of Medicare beneficiaries to ensure that all individuals who were potentially eligible for the subsidy were made aware of the benefit and had an opportunity to apply for it. SSA officials said that they would have preferred to specifically target Medicare beneficiaries who were more likely to be eligible for the subsidy by using tax data from IRS on individuals’ wage, interest, and pension income, which would be needed to determine individuals’ level of income and assets. Without such data, SSA can neither estimate how many individuals might qualify for the subsidy nor identify individuals to target for more direct outreach. The officials said that their prior experience with other low-income-based programs had shown that more targeted outreach efforts helped to elicit a higher response rate. Current law permits SSA to obtain income and asset data from IRS to assist in verifying income and asset data provided by individuals who have applied for the subsidy. However, to protect the privacy of taxpayer information and enhance tax compliance, the law prohibits disclosures of such information to identify individuals who may be eligible for the subsidy, but have not applied.

In a November 2006 report, the HHS Office of Inspector General reported that legislation is needed to provide SSA and CMS access to income tax data to help the agencies more effectively identify beneficiaries potentially eligible for the subsidy. While SSA uses various sources of information to identify individuals’ income, it does not have access to income data that could assist in imputing an individual’s level of assets, which it believes could be provided through IRS income tax data. SSA estimates individuals’ assets because IRS income tax return and other tax data do not contain asset information. However, IRS officials told us that its data have many limitations that could affect their usefulness. For example, IRS officials said that they have limited data on assets for individuals whose income is less than $20,000, because these individuals do not typically have interest income, private pensions, or dividend income from stocks that could assist SSA in estimating an individual’s potential asset level. Also, the officials said that many people with low incomes are not required to file taxes, and therefore IRS would have only limited information on them. IRS officials also explained that tax data could most likely identify individuals who would not qualify for the subsidy, rather than those who would. Conversely, the officials stated that tax data might incorrectly eliminate some people who might qualify for the subsidy, which could result in SSA not contacting them. Moreover, the IRS officials said that the data it provides to SSA to determine eligibility could be almost 2 years old and may not reflect an individual’s current income. For example, for subsidy applications in 2007, the last full year of tax data the IRS could provide would be for 2005. Given these various factors, IRS officials stated that summarily sharing private taxpayer data to identify individuals who could qualify for the subsidy, and the potential cost of systems changes, would have to be weighed against the added value of the data. Despite IRS’s position on the limitations of its data on low-income taxpayers, SSA officials believe that IRS data can still help to better target the eligible population. However, no effort has been undertaken to determine the extent to which IRS income data could benefit SSA in this effort, or improve estimates of the eligible population. Legislation is currently pending before the Congress to permit IRS to share taxpayer data with SSA to assist the agency in better identifying individuals who might be eligible for the subsidy.

Barriers That Limited SSA’s Solicitation Efforts

Although SSA has approved 2.2 million applicants for the subsidy, it initially faced difficulties in soliciting applications. To solicit applications, SSA sent its first targeted mailing to the 18.6 million potentially eligible individuals between May and August 2005. The mailings included an application for the subsidy and instructions on how to apply. SSA worked with various focus groups to develop the application, which included questions about applicants’ income and resources, the value of life insurance policies, and household size. Appendix II provides the total number of subsidy applications mailed by state. After the subsidy applications were mailed, a contractor then made phone calls to 9.1 million beneficiaries who had not responded to the initial mailing, and SSA made 400,000 follow-up calls to the beneficiaries who requested SSA assistance. SSA also conducted other follow-up efforts, including sending follow-up notices to individuals whom the contractor was unable to contact and to specific subgroups that it identified as having a high likelihood of qualifying for the subsidy, such as the disabled; individuals over 79 years of age living in high-poverty areas; and individuals in Spanish-speaking, Asian-American, and African-American households. In addition, SSA called over 300,000 Medicare beneficiaries who had not applied, but had previously qualified for a temporary Medicare drug discount card, and included information about the subsidy in its 2005 and 2006 annual cost of living adjustment notices to Social Security beneficiaries and its annual Medicare Savings Program outreach letters.

SSA’s efforts to solicit applications were hindered by various factors, including individuals’ confusion over the difference between the prescription drug program and the subsidy, the reluctance of some individuals to share personal financial information, and eligibility requirements, among other factors. According to SSA field office staff and state Medicaid and advocacy group officials, many individuals were confused about the difference between the prescription drug program and the subsidy, and did not understand that they involved separate application processes, although the subsidy application and the decision letters explained that Part D enrollment was a separate process. Consequently, some individuals thought that once they were approved for the subsidy, they were automatically enrolled in a prescription drug plan and vice versa to a lesser extent. SSA field office staff and advocacy group officials also told us some individuals were reluctant to apply because they did not want to share their personal financial information for fear that an inadvertent error on the application could subject them to prosecution under the application’s perjury clause. Though the impact of these factors has lessened as individuals have become more educated about the subsidy, concerns remain about eligibility requirements and the overall complexity of the application. For example, SSA field office staff and advocacy group officials said that the subsidy’s resource test may render some low-income individuals ineligible because of retirement savings or the value of other resources. Legislation has been proposed to increase the resource limit to allow more beneficiaries to qualify for the subsidy. Advocacy group officials also said that the application may be too complex for many elderly and disabled beneficiaries to understand and complete without the assistance of a third party. SSA headquarters officials told us that they have revised the subsidy application several times to address such concerns, but that much of the information that applicants may view as complex is required by the MMA.

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

Although the low-income subsidy participation rate compares somewhat favorably to those of some low-income programs during similar stages of implementation, the success of SSA’s efforts is uncertain because no reliable data exist on the total number of individuals potentially eligible for the subsidy. Using available estimates of the potentially eligible population, SSA approved between 32 to 39 percent of the eligible population who were not automatically deemed by CMS for the subsidy. According to these estimates by CMS, the Congressional Budget Office, and other entities, there are between about 3.4 million to 4.7 million individuals who are eligible for the subsidy, but have not yet applied (See table 2). In developing these estimates, however, these entities faced the same data limitations as SSA in identifying potentially eligible individuals.

SSA officials said that it is unfair to judge the success of its outreach efforts for the subsidy in relation to these estimates, given the limitations in identifying the size of the eligible population. SSA officials stated that the program has been successful in meeting its internal outreach goals. The advocacy group officials we interviewed agreed that SSA has informed all Medicare beneficiaries of the benefit and provided them with the opportunity to apply, but advocates questioned the effectiveness of SSA’s outreach methods because of the lack of personal assistance available for elderly and disabled individuals who may not be connected to a social service organization and may not be able to go into an SSA field office. Advocacy groups believe that a more personalized outreach approach, such as door-to-door contact, is needed to encourage these individuals to apply for the subsidy. However, SSA officials also stated that door-to-door contact with individuals would be a resource intensive and costly endeavor for the agency.

After over 2 years of implementation efforts, however, SSA’s estimated participation rate of 32 to 39 percent of individuals who were not automatically deemed eligible for the subsidy compares favorably to those of some other low-income programs at a similar stage of implementation. SSA’s participation rate is around 68 to 74 percent when the deemed population is included. However, we focused on the participation rate of the nondeemed population, because this is the population of individuals who had to sign up for the subsidy and to whom SSA targeted its outreach efforts. After its second year of national implementation in 1976, the Food Stamp Program had an estimated participation rate of 31 percent. During its second year of implementation in 1975, the SSI program had an estimated participation rate of 50 percent for those 65 or older. According to SSA officials, two-thirds of the early elderly participants were automatically transferred from state government programs to SSI (these individuals are similar to those deemed eligible for the Part D low-income subsidy). In both instances, the low-income subsidy participation rate compares favorably.

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

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

Eligibility Determinations

To determine individuals’ eligibility for the subsidy, SSA largely relies on an automated process. After an individual applies, income and resource data provided by the applicant are electronically compared to income data provided by IRS and other agencies to determine if the individual meets income and resource requirements. In cases where there are conflicting data or questions regarding the data, SSA field office staff follow up with individuals to address such matters. SSA tracks the number of eligibility determinations it makes, the outcome of those determinations, and the length of time for completing the determinations. SSA also tracks data on denials, and periodically conducts samples to examine the reasons for such actions. Although the subsidy did not become available until January 2006, SSA began processing applications in July 2005 to encourage people to take advantage of the benefit when it became available.

As of March 2007, approximately 6.2 million individuals had applied for the subsidy. SSA officials noted that the heaviest volumes occurred when the public outreach campaign was most active. Figure 3 provides data on the cumulative number of subsidy applicants and approvals from November 2005, when SSA began tracking the data, to December 2006.

Of the approximately 6.2 million individuals who had applied for the subsidy as of March 2007, SSA approved 2.2 million, denied 2.6 million, determined that no decision was required for 1.4 million, and had decisions pending for 80,000 applicants. According to SSA officials, those requiring no decision were the result of duplicate applications, applications from individuals automatically qualified for the subsidy, or canceled applications. To identify reasons for subsidy denials, SSA conducted three separate studies that sampled a total of 1,326 denied claims. These studies showed that most of applicants were denied due to resources or income that exceeded allowable limits set by the MMA (fig. 4). SSA officials stated that they plan to conduct a longitudinal study to examine the reasons for all cases in which applicants were denied the subsidy.

While SSA has captured data on the length of time it takes to make eligibility determinations since it began accepting applications for the subsidy in July 2005, it did not develop the capability to report the data, and did not establish a performance goal for processing times until March 2007. As a result, SSA did not have the management information that it needed to monitor its performance in this area and identify areas where improvements were needed. SSA has now established a goal of processing 75 percent of subsidy applications in 60 days. In March 2007, SSA provided us with information showing the percentage of subsidy applications processed within certain periods of time, ranging from 30 days or less, to over 120 days. SSA’s data as of mid-March for calendar year 2007 showed that of the approximately 213,000 applications received, SSA had processed about 94 percent in 60 days or less, compared to nearly 91 percent of the approximately 1.3 million applications within the same time frame for calendar year 2006.

Appeals

Individuals may appeal denied subsidy determinations, as well as the level of the subsidy, by calling SSA’s national toll-free number or calling, writing, or visiting any Social Security field office. Individuals may also complete an appeals form available on SSA’s Web site and mail it in to SSA. Individuals have the choice of having their appeal conducted through a telephone hearing or a case file review. To process appeals, SSA established six Special Appeals Units. SSA tracks data on the total number of appeals and the time it takes to process them, the method used to resolve appeals, the reason for appeals, and the final disposition of appeals. However, SSA does not currently have a performance goal to assess the timeliness of its appeals decisions, and lacks the capability to report this information. In follow-up with SSA officials on their comments on a draft of this report, they told us that the agency is planning to establish a goal of processing 75 percent of appeals in 60 days, but will have to modify its system to report this information. SSA officials told us that they have managed the appeals process by redirecting resources when case-processing times for appeals exceed 60 days.

Regarding data on SSA’s appeals process, an SSA sample, conducted in July 2006, showed that about 80 percent of individuals chose to have a case file review. According to SSA data on appeals from August 2005 to February 2007, it received about 79,000 appeals and completed about 76,000. The number of appeals was consistent with SSA’s initial estimate that about 3 percent of denied subsidy applications would be appealed, based on its experience with other programs. On the basis of an SSA sample of 781 appeals, SSA reversed its decision for 57 percent of the cases and upheld its decision for the remaining 43 percent.

SSA data show that the overall volume of appeals received was the highest from November 2005 and July 2006, declined between August and November 2006, and rose again between December 2006 and February 2007 (See table 3). During the decline, SSA closed all but one of its Special Appeals Units by October 2006.

The time it took SSA to process appeals varied widely, and did not necessarily decrease when the caseloads grew smaller. For example, SSA appeals workload data showed that it took SSA an average of 80 days to resolve approximately 11,600 appeals in April 2006, but took about 90 days to resolve about 1,800 appeals in July 2006. SSA data from December 2006 through February 2007 also show that the agency’s processing time for resolving appeals has not shown consistent improvement. For example, it took SSA an average of 16 days to process 1,254 appeals in December 2006, but 42 days to process 2,463 appeals in February 2007. An SSA July 2006 sample of 781 appeals showed that 63 percent of appeals were filed based on applicants’ challenges regarding an income issue, 24 percent were based on applicants’ challenge regarding a resource issue, and 13 percent were based on other issues, such as an applicant’s failure to respond to SSA requests for additional data in a timely manner. SSA officials stated that the agency plans to broaden the sampling effort to better understand the reasons for appeals.

Redeterminations

According to the MMA and SSA regulations, all recipients of the low- income subsidy are required to have a redetermination of their eligibility within 1 year after SSA first determines their eligibility. Future redeterminations are required to be conducted at intervals determined by the Commissioner. SSA’s regulations provide that these periodic redeterminations be conducted based on the likelihood that an individual’s situation may change in a way that affects subsidy eligibility. Additionally, SSA’s regulations provide that unscheduled redeterminations may take place at any time for individuals who report a change in their circumstances, such as marriage or divorce. However, there is no specific requirement that recipients report such changes. SSA tracks various results from the redeterminations process, such as the number of decisions made, and number and level of continued subsidies, but does not track the amount of time needed to complete redetermination decisions.

SSA initiated its first cycle of redeterminations in August 2006, which included all of the approximately 1.7 million individuals who were determined to be eligible for the subsidy prior to April 30, 2006. SSA excluded from the redeterminations process about 562,000 individuals who were either deceased, automatically deemed eligible for the benefit by CMS, or whose subsidy benefit had been terminated. As a result, SSA sent approximately 1.2 million notices to inform individuals that their continued eligibility status was being reviewed. The notice also provided individuals with the income and resources data contained in SSA’s files and asked them to notify SSA if the information had changed. SSA subsequently sent 242,000 forms to beneficiaries who reported changes to their income or resources, or whom SSA had identified as having such changes from other sources, to allow them to indicate changes to the information or dispute it. SSA data show that as of February 2007, SSA had completed approximately 237,000 redeterminations. About 69,000 individuals remained at the same subsidy level, another 69,000 had a change in their subsidy level, and 98,000 individuals had their subsidies terminated, based on a change in their circumstances.

SSA does not track processing time for redetermination decisions and has not established a performance time target for processing such actions. SSA officials stated that since the redeterminations process is conducted within a certain period of time, it is unnecessary to track the processing time for individual redetermination decisions. However, as stated previously, GAO internal control standards state that agencies should establish performance measures for all activities and compare actual performance against expected goals. Without such data, SSA will be unable to identify areas in need of improvement.

The Impact of the Subsidy Program Has Been Manageable

Although the subsidy program affected SSA’s workload and operations, SSA officials said that the additional workload was manageable overall. SSA hired a total of 2,200 field office staff to assist with subsidy applications, as well as an additional 500 headquarters staff to support its MMA activities. SSA officials stated that the agency’s major activities for implementing low-income subsidy activities for fiscal year 2004 included preparing public information materials for the subsidy, systems development, and developing internal training materials for staff. Officials also stated that major subsidy work activities for fiscal year 2005 included hiring the approximately 2,200 field office staff, processing subsidy applications, and establishing Special Appeals Units. For fiscal year 2006, SSA provided us with data showing that staff spent the equivalent of approximately 2,190 work years on low-income subsidy activities, with almost 50 percent of the time used to process subsidy applications. These activities included processing subsidy applications and resolving appeals, and developing business process planning and systems development for the redeterminations process.

SSA officials stated that the agency’s new responsibilities under the subsidy program have not adversely affected its other workloads. In fact, SSA officials pointed out that the processing times for other workloads improved in fiscal years 2005 and 2006. For example, SSA exceeded its goal of paying 83 percent of initial claims for retirement and survivor benefits at the earliest point due, or 14 days after an applicant filed a claim—the actual performance was approximately 85 and 87 percent, respectively. Additionally, SSA exceeded its goal of paying 75 percent of SSI claims for the elderly before their payment was due, or no more than 14 days after an applicant filed a claim—the actual performance was approximately 85 and 88 percent, respectively.

Although SSA can track expenditures for implementing its various MMA responsibilities overall, it cannot track expenditures related specifically to low-income subsidy activities or other specific sublevel MMA activities. For example, SSA cannot calculate the total amount of the $500 million congressional appropriation it received for MMA start-up costs that was spent on the subsidy program versus its other MMA responsibilities. Although SSA could not provide documentation of the total amount of its subsidy-related expenditures, it estimates that its costs related to the subsidy program are about $175 million annually, based on workload samples. However, SSA is planning to develop a tracking mechanism to more accurately capture the data.

SSA officials attribute the light impact of the subsidy program to various factors, including the automation of the subsidy application process and the $500 million congressional appropriation it received for administrative start-up costs to implement its MMA responsibilities. SSA officials also told us that they were able to manage the other workloads because the peak increases in subsidy applications and inquiries were short-lived, allowing SSA’s operations to return to a more normal operating level after handling these peak work volumes. SSA officials stated that they expect small increases in its low-income subsidy workload during future prescription drug plan open seasons, which typically have been held from November to December.

SSA’s spending on its Medicare activities peaked in fiscal year 2005 (see table 4) as supported by the $500 million congressional appropriation for MMA start-up activities; more recent increases in such spending could cause pressure on SSA’s other workloads in the future. The amount of SSA’s administrative costs covered by the Medicare Trust Funds increased by about 37 percent between fiscal year 2003 and estimated spending in fiscal year 2008. The minimal impact of the subsidy workload and other MMA activities through fiscal year 2006 was due, in part, to the $500 million separately appropriated by the Congress. Now that the additional $500 million is exhausted, SSA’s MMA responsibilities must compete with all other workloads for resources within the overall administrative appropriation limits. If the cost of SSA’s Medicare workload increases, as it has done recently, SSA’s other workloads may experience pressure if the overall administrative appropriation does not increase proportionately.

Conclusions

SSA has made progress in approving individuals for the low-income subsidy, but has not established specific performance goals and measures for its outreach activities. Without such goals and measures, SSA will not have a means to assess the effectiveness of its efforts, or to identify areas that require improvement as it moves forward. Having such goals and measures takes on heightened importance now since SSA is conducting outreach efforts on a more limited basis. Although no reliable data currently exist on the population of individuals who might qualify for the subsidy, SSA does not need such data to establish specific performance goals and measures to assess its outreach efforts. For example, SSA could set specific goals and measures to assess the effectiveness if its outreach efforts for subpopulations where there is an underrepresentation of subsidy applications. Monitoring the progress of such efforts could help SSA to identify areas where increased outreach efforts are needed.

Assessing the performance of outreach efforts can also help SSA to make more efficient use of staff resources by directing them to areas where increased outreach efforts are needed to encourage applications among underrepresented segments of the eligible population. While advocacy groups have called for a more personalized outreach approach, such as door-to-door contact, to encourage additional enrollments among Medicare beneficiaries, it may be difficult for SSA to conduct such efforts, given its resource limitations. Also, it is unclear how much more outreach is needed, given the lack of reliable data on the eligible population. The extent of additional outreach efforts will also depend on SSA’s ability to more precisely identify remaining individuals eligible for the subsidy. However, it is not clear to what extent additional taxpayer data from IRS could help SSA to better target individuals potentially eligible for the subsidy. Until an effort is undertaken to better determine the size of the population that is eligible for the subsidy, it will be difficult for SSA and others to assess its progress in approving individuals for the subsidy.

Finally, while SSA has considerable data on its subsidy application processes, it lacks systematic performance indicators to compare results to expected goals. Without processing time data for redetermination decisions, and performance measures for all subsidy application processes, SSA will not have the information that it needs to assess the quality of the services it provides or to identify areas of improvement. The importance of identifying people who could benefit from the subsidy, coupled with ensuring a timely and reliable process for deciding initial determinations, hearing appeals, and making redeterminations, is essential to the success of the low-income subsidy.

Recommendations for Executive Action

To improve SSA’s outreach efforts and its ability to measure the effectiveness of the Medicare Part D low-income subsidy application processes, we recommend that the Commissioner of Social Security: establish specific performance goals and measures for SSA’s outreach activities to provide the agency with a means to assess their effectiveness in soliciting applications from additional individuals who qualify for the subsidy, but have not yet applied, and direct staff to begin collecting data on the processing time for individual redetermination decisions, and establish performance standards for processing time for the appeals and redetermination decisions.

We also recommend that the Commissioners of SSA and IRS work together to assess the extent to which IRS tax data may help SSA to better target individuals who might qualify for the subsidy, possibly aiding SSA in better targeting its outreach efforts. This effort could also aid in developing more precise estimates of the eligible population and help to better inform the Congress on legislative proposals to allow IRS to share tax data with SSA to assist the agency with its outreach efforts.

Agency Comments

We obtained written comments on a draft of this report from the Commissioners of SSA and IRS. SSA agreed in theory with our recommendation to develop a comprehensive plan, with specific performance goals and measures, to detail the agency’s strategy for encouraging individuals who qualify for the subsidy to apply. In its response and in a follow-up discussion, SSA stated that it believes that its National Strategic Communications Plan serves as a comprehensive plan for its outreach efforts agencywide, but stated that it would not be able to implement specific goals and measures due to the lack of reliable data on the eligible population. We agree that SSA’s National Strategic Communications Plan serves as a comprehensive plan for describing the agency’s outreach efforts, and revised our recommendation accordingly. However, we do not believe that data on the potentially eligible subsidy population, while useful, are needed for SSA to establish specific performance goals and measures to assess the effectiveness of its outreach efforts.

SSA disagreed with our recommendation to begin collecting data on the processing time for redetermination decisions, and establish performance standards for processing times for appeals and individual redetermination decisions. SSA stated that it monitors the time for completing the overall redetermination cycle, which provides adequate management controls for operational data. On the basis of GAO’s internal control standards, we believe that SSA should measure the time for processing individual redetermination decisions because it could provide the agency with information on the efficiency of processing such decisions. While SSA stated that it had established a performance standard for assessing the timeliness of appeals, in a follow-up discussion with agency officials after receiving their comments, they told us that the goal did not currently exist, but that the agency is planning to establish a goal of processing 75 percents of appeals in 60 days. SSA officials added that the agency would have to conduct additional programming to produce management information for this data.

SSA agreed with our recommendation for the agency to work with IRS to assess the extent to which IRS tax data may help SSA to better identify individuals who might qualify for the subsidy. SSA stated that it has begun discussions with IRS to evaluate how such a study might be designed. IRS also agreed with this recommendation and stated that it is willing to work with SSA in conducting such a study. IRS emphasized, however, that current law prohibits the agency from sharing tax information, other than in statistical form, before an individual applies for the subsidy. IRS also discussed various limitations that could affect the usefulness of its tax data. For example, IRS stated that its data may only be useful in screening out individuals who do not qualify for the subsidy. In view of this, we adjusted our recommendation to reflect that the study may assist SSA in better targeting individuals who might qualify for the subsidy, rather than identifying this population.

SSA’s comments are reproduced in appendix III, and IRS comments are reproduced in appendix IV. Technical comments provided by each of these agencies have been included in the report as appropriate.

As agreed with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after its issue date. At that time, we will send copies of this report to the Commissioner of SSA, the Secretary of HHS, the Commissioner of IRS, and other interested parties. Copies will also be made available at no charge on GAO’s Web site at http://www.gao.gov.

If you have questions concerning this report, please call me on (202) 512-7215. Contact points for our Offices of Congressional Relations and Public Affairs, respectively, are Gloria Jarmon, who may be reached on (202) 512-4470, and Paul Anderson, who may be reached on (202) 512-4800.

Appendix I: Objectives, Scope, and Methodology

To assess the Social Security Administration’s (SSA) implementation of the Medicare Part D low-income subsidy, we reviewed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) to understand SSA’s responsibilities under the law. We also reviewed various policies and regulations SSA established to carry out its new responsibilities, as well as guidance provided to field office staff to assist them in answering questions about the subsidy and taking subsidy applications. We obtained information on SSA’s implementation activities from SSA officials in the agency’s headquarters in Baltimore, Maryland, and in two regional offices, and from management and staff in eight SSA field office locations in Texas, Maryland, Virginia, and Pennsylvania. We selected SSA offices in those states because of the large number of subsidy applications that had been mailed to individuals who were potentially eligible for the subsidy. In addition, we selected SSA offices in Pennsylvania and Texas in particular because they had counties (Philadelphia County in Pennsylvania and Dallas and Fort Worth Counties in Texas) that had the most low-income subsidy applicants as of June 2006. To understand state Medicaid agencies’ responsibilities for administering the subsidy, we reviewed regulations provided to these agencies from the Department of Health and Human Service’s (HHS) Centers for Medicare and Medicaid Services (CMS). In addition, we discussed views on SSA’s implementation actions and feedback that had been received from clients on the subsidy with state Medicaid agency officials in Colorado, Kansas, Utah, Pennsylvania, and Texas. We selected state Medicaid offices in Colorado, Kansas, Pennsylvania, and Utah because they had established processes to make low-income subsidy determinations. We also selected the Colorado and Kansas state Medicaid agencies because we wanted to gain the perspectives of state officials that had made low-income subsidy determinations. We visited the Texas state Medicaid agency to gain the perspective of a state that had not yet set up such a process, but had plans to do so in the future. We also interviewed state Health Insurance program officials in Pennsylvania and Texas, and officials from six advocacy groups, including the Access to Benefits Coalition, the Health Assistance Partnership of Families USA, and the Henry J. Kaiser Family Foundation. To obtain a contextual framework of concerns surrounding the subsidy and issues that could affect its implementation, we reviewed reports from GAO, the Congressional Research Service, the Office of Inspector General of HHS, and various reports from advocacy groups representing the elderly and disabled, whom the subsidy was primarily designed to benefit.

To assess SSA’s progress in identifying individuals potentially eligible for the subsidy, we discussed the methodology the agency used to target this population with SSA Medicare Task Force officials responsible for implementing the subsidy program; we also discussed with them the agency’s overall outreach strategy and obtained and reviewed supporting documentation. In particular, we discussed in detail how SSA developed the approximately 18.6 million population of individuals to whom it targeted its original mass mailing of subsidy material, as well as how it more narrowly targeted groups within that population. We reviewed SSA’s target population by looking at the number of total Medicare recipients and estimates of the total eligible population developed by the Congressional Budget Office, CMS, and others. We also met with Internal Revenue Service (IRS) officials to discuss the data restriction, and concerns officials would have if the law were changed to grant SSA access to IRS data for better targeting outreach efforts. To understand SSA’s efforts to solicit subsidy applications, we discussed with SSA officials the process used to develop subsidy outreach materials and cognitive tests that had been conducted to ensure that the materials were written at an appropriate educational level for the target population. We discussed SSA’s outreach methodology with officials from CMS, state Medicaid agencies, and various advocacy groups. Additionally, we discussed and obtained supporting documentation of training provided to field office staff on the subsidy and discussed with staff the usefulness of the training.

To review SSA’s subsidy application processes—making eligibility determinations, resolving appeals, and redetermining individuals’ continued subsidy eligibility—we reviewed the laws and regulations relating to each of these processes and SSA’s strategic plan for relevant performance goals and measures. Specifically for the subsidy eligibility determinations process, we reviewed monthly data on the total number of subsidy determinations. For applicants that had been denied the subsidy, we obtained and reviewed available data on the reasons for the decisions. We requested SSA data on the timeliness of the eligibility determinations, but were told that while SSA captured the data in its Medicare Applications System, it had only recently developed the business requirement to report the data. Regarding SSA’s appeals resolution process, we reviewed three SSA studies on samples of appeals identifying the reasons for the appeals and the final disposition of the appeal. We also reviewed SSA data on the total number of appeals filed and the length of time for resolving them. Regarding the redeterminations process, we reviewed data on the number of determinations conducted during the first cycle in 2006 and the statistics on the results. We discussed with SSA officials the actions that it planned to take to provide information on these processes, as well as SSA’s plans for developing performance goals and measures for these processes. On the basis of electronic data provided to us, we were generally able to verify some data on the processing time for eligibility determinations. However, we did not have all of the information needed to verify the validity of other data.

To determine the impact that subsidy work activities had on SSA operations, we discussed the issue with SSA headquarters officials and field office managers and staff. In particular, we obtained and reviewed SSA estimates of the resources the agency would need to implement the low-income subsidy and discussed with SSA officials the mechanisms for assessing the program’s impact. We also coordinated with another GAO team that is reviewing how SSA spent the $500 million appropriation for implementing all of the agency’s responsibilities under the MMA. In addition, we reviewed SSA’s methods for tracking financial expenditures and staff time dedicated to Part D activities. We also discussed with SSA the implications of possible budget restrictions and reductions in carrying out its Part D work. Finally, we reviewed SSA budget documents and spending on the Medicare Trust Fund from fiscal year 2003 to fiscal year 2008.

We conducted our work between May 2006 and April 2007 in accordance with generally accepted government auditing standards.

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

Appendix III: Comments from the Social Security Administration

Appendix IV: Comments from the Internal Revenue Service

Appendix V: GAO Contact and Staff Acknowledgments

Acknowledgments

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

Related GAO Products

Medicare Part D: Challenges in Enrolling New Dual-Eligible Beneficiaries. GAO-07-272. Washington, D.C.: May 4, 2007.

Prescription Drugs: An Overview of Approaches to Negotiate Drug Prices Used by Other Countries and U.S. Private Payers and Federal Programs. GAO-07-358T. Washington, D.C.: January 11, 2007.

Medicare Part D: Prescription Drug Plan Sponsor Call Center Responses Were Prompt, but Not Consistently Accurate and Complete. GAO-06-710. Washington, D.C.: June 30, 2006.

Medicare: Communications to Beneficiaries on the Prescription Drug Benefit Could Be Improved. GAO-06-654. Washington, D.C.: May 3, 2006.

Social Security Administration: Medicare Part D Subsidies. GAO-06-344R. Washington, D.C.: January 13, 2006.

Medicare: Contingency Plans to Address Potential Problems with the Transition of Dual-Eligible Beneficiaries from Medicaid to Medicare Drug Coverage. GAO-06-278R. Washington, D.C.: December 16, 2005.

Medicare: CMS’s Beneficiary Education and Outreach Efforts for the Medicare Prescription Drug Prescription Drug Discount Card and Transitional Assistance Program. GAO-06-139R. Washington, D.C.: November 18, 2005.

Medicare: CMS’s Implementation and Oversight of the Medicare Prescription Drug Discount Card and Transitional Assistance Program. GAO-06-78R. Washington, D.C.: October 28, 2005.

Retiree Health Benefits: Options for Employment-Based Prescription Drug Benefits under the Medicare Modernization Act. GAO-05-205. Washington, D.C.: February 14, 2005.

Medicare Savings Programs: Results of Social Security Administration’s 2002 Outreach to Low-Income Beneficiaries. GAO-04-363. Washington, D.C.: March 26, 2004.