[Federal Register Volume 70, Number 42 (Friday, March 4, 2005)]
[Proposed Rules]
[Pages 10558-10572]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-4097]



[[Page 10558]]

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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 418

RIN 0960-AG03


Medicare Part D Subsidies

AGENCY: Social Security Administration (SSA).

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: We propose to add to our regulations a new part 418 to contain 
rules that we will apply when we evaluate applications for premium and 
cost-sharing subsidies under the Medicare program. We propose to 
include a new subpart D, Medicare Part D Subsidies, to this part. This 
new subpart would contain the rules that we use to determine 
eligibility for premium and cost-sharing subsidies under the Medicare 
Part D program, which was added by the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (Medicare Modernization 
Act). These proposed rules would describe: what the new subpart is 
about; how we determine whether you are eligible for premium and cost-
sharing subsidies; how we redetermine your eligibility for a subsidy; 
how you apply for a subsidy; how we evaluate your income and resources; 
when your eligibility for premium and cost-sharing subsidies 
terminates; how you may report changes in your circumstances; and how 
you can appeal a determination we make under the Part D subsidy 
program.

DATES: To be sure your comments are considered, we must receive them by 
May 3, 2005.

ADDRESSES: You may give us your comments: by using our Internet site 
facility (i.e., Social Security Online) at http://policy.ssa.gov/pnpublic.nsf/LawsRegs or the Federal eRulemaking Portal: http://www.regulations.gov; by e-mail to [email protected]; by telefax to 
(410) 966-2830; or by letter to the Commissioner of Social Security, PO 
Box 17703, Baltimore, MD 21235-7703. You may also deliver them to the 
Office of Disability and Income Security Programs, Office of 
Regulations, Social Security Administration, 100 Altmeyer Building, 
6401 Security Boulevard, Baltimore, MD 21235-6401, between 8 a.m. and 
4:30 p.m. on regular business days. Comments are posted on our Internet 
site. You also may inspect the comments on regular business days by 
making arrangements with the contact person shown in the preamble.

Electronic Version

    The electronic file of this document is available on the date of 
publication in the Federal Register on the Internet site for the 
Government Printing Office at http://www.gpoaccess.gov/fr/index.html. 
It is also available on the Internet site for SSA (i.e., Social 
Security Online) at http://policy.ssa.gov/pnpublic.nsf/LawsRegs.

FOR FURTHER INFORMATION CONTACT: Craig Streett, Team Leader, Office of 
Income Security Programs, Social Security Administration, 252 Altmeyer 
Building, 6401 Security Boulevard, Baltimore, MD 21235-6401, 410-965-
9793 or TTY 1-800-966-5906, for information about this notice. For 
information on eligibility or filing for benefits, call our national 
toll-free number, 1-800-772-1213 or TTY 1-800-325-0778, or visit our 
Internet site, Social Security Online, at http://www.socialsecurity.gov.

SUPPLEMENTARY INFORMATION:

Statutory Provisions

    Section 101 of the Medicare Modernization Act (Public Law 108-173), 
which was enacted into law December 8, 2003, adds sections 1860D-1 
through 1860D-24 to the Social Security Act (the Act), and establishes 
a new Part D program for voluntary prescription drug coverage effective 
January 1, 2006. The Centers for Medicare & Medicaid Services (CMS) has 
overall responsibility for implementing the voluntary Medicare Part D 
prescription drug benefit and published final rules on January 28, 2005 
at 70 FR 4193. As described in these proposed rules, we are responsible 
only for the premium and cost-sharing subsidy (the subsidy) portion of 
the Medicare Part D prescription drug benefit program. We are 
authorized to make eligibility determinations, provide appeal 
procedures, and perform eligibility redeterminations for the Part D 
subsidy in the 50 States and the District of Columbia. We will not 
undertake this task for Medicare beneficiaries who live in the 
territories or who live outside of the 50 States or the District of 
Columbia.
    Section 702(a)(5) of the Act allows us to make the rules and 
regulations necessary or appropriate to carry out the functions of SSA. 
Section 1860D-14 of the Act provides for premium and cost-sharing 
subsidies of prescription drug coverage for certain individuals with 
low income and resources. An individual must be entitled to benefits 
under Medicare Part A or enrolled in Medicare Part B in order to 
receive a subsidy. Section 1860D-14(a)(3)(B) directs us to make subsidy 
determinations. It also requires us to provide appeal procedures for 
subsidy eligibility determinations and to perform redeterminations. 
(State Medicaid agencies have similar responsibilities that are covered 
in CMS' final rules.) The agency that processes the subsidy application 
will handle redeterminations and appeals arising from that application.

Background

    The purpose of the subsidy program is to assist some Medicare 
beneficiaries, who have limited financial means, to pay for voluntary 
Medicare prescription drug coverage under the Medicare Part D program. 
If you have low income and limited resources, you may be eligible for a 
subsidy to help you pay your monthly premium, your copayments, and the 
annual deductible under your Medicare Part D prescription drug plan. If 
you are a Medicare beneficiary or are applying for Medicare benefits 
and you want to receive a subsidy, you must follow a two-step process 
to obtain prescription drug benefits:
     File a subsidy application either with SSA or with your 
State Medicaid Agency to see if you qualify for a subsidy; and
     Enroll with an authorized prescription drug provider for 
the Medicare Part D prescription drug benefit; i.e., the prescription 
drug plan, while your subsidy application is still in effect. (We do 
not enroll beneficiaries for Medicare Part D. If you are a Medicare 
beneficiary, you must take the necessary steps to enroll yourself with 
a participating approved prescription drug plan or Medicare Advantage 
plan that offers prescription drug coverage. You may obtain information 
about enrolling by calling CMS at 1-800-Medicare.) You may take these 2 
steps in any order. However, if you receive Medicaid coverage, are 
enrolled in a Medicare Savings Program within your State, or receive 
Supplemental Security Income (SSI) and have Medicare, you will be 
deemed eligible for this help and need not file a subsidy application.

How to Become Eligible for a Subsidy

    Section 1860D-14 of the Act requires us to take applications for 
subsidies from individuals applying for Medicare Part D prescription 
drug coverage. These proposed rules describe the requirements you must 
meet to become eligible for a subsidy and what conditions will prevent 
you from receiving a subsidy. Criteria for eligibility include:
     You must be entitled to benefits under Medicare Part A 
(Hospital

[[Page 10559]]

Insurance) and/or enrolled in Medicare Part B (Supplementary Medical 
Insurance) under title XVIII of the Act;
     You must be enrolled in a Medicare prescription drug plan 
or Medicare Advantage plan with prescription drug coverage (i.e., 
Medicare Part D) by the end of your enrollment period;
     You must reside in the United States as defined in Sec.  
418.3010;
     You (and your spouse, if applicable) must meet the income 
and resource requirements of the subsidy program; and
     You must apply for the subsidy.
    Conditions that could prevent you from receiving a subsidy include:
     You lose entitlement to or are not enrolled in Medicare 
Part A and you also lose eligibility for or are not enrolled in 
Medicare Part B, or
     You do not enroll with a Medicare prescription drug plan 
or Medicare Advantage plan with prescription drug coverage or you are 
no longer enrolled in a Medicare Part D plan.
    These proposed rules also tell you that if we made the original 
determination of subsidy eligibility, we will periodically review your 
subsidy eligibility to make sure that you are still eligible for a 
subsidy and to determine whether you should receive a full or partial 
subsidy. The amount of subsidies for Part D premiums, deductibles, and 
co-payments will be based on the amount of your income and resources 
(and those of your spouse, if applicable) and your family size.
    Section 1860D-14(a)(3)(B)(ii) specifies that initial subsidy 
determinations will remain in effect for a period to be determined by 
the Secretary of Health and Human Services but not to exceed 1 year. 
Section 1860D-14(a)(3)(B)(iv) provides that we shall conduct 
redeterminations periodically. We interpret these provisions together 
as envisioning prospective determinations that remain unchanged until 
we conduct the next redetermination of eligibility. To comply with the 
1 year limitation in section 1860D-14(a)(3)(B)(ii), we will conduct the 
first redetermination within 12 months of our final determination of 
your eligibility.
    However, we recognize that certain life events could have a 
significant impact on your income, resources or family size which in 
turn could impact your eligibility for a subsidy or the amount of your 
subsidy. Therefore, these rules propose an exception to the general 
assumption that a determination remains in effect until we conduct the 
next redetermination.
    Under that exception, if you are a subsidy-eligible individual and 
your income, resources or family size changes because of marriage, 
divorce, annulment, separation (legal or physical), or the death of 
your spouse, you may ask us to redetermine your subsidy based on your 
new circumstances. When you report such a change, we will send you a 
redetermination form. If you want us to redetermine your subsidy, 
complete the form and return it to us. The redetermined subsidy, if 
any, will be effective with the month after the month you request to 
redetermine your subsidy. We may process other changes, such as the 
loss of a job, which you would report, in conjunction with your next 
redetermination.

Applying for a Subsidy

    Applying for the subsidy under Medicare Part D is a two-step 
process. You must:
     Apply for the subsidy with us or your State Medicaid 
agency, and
     Enroll in Medicare Part D by enrolling in a Medicare 
prescription drug plan or Medicare Advantage plan with prescription 
drug coverage.
    You may take either step first, but the subsidy will not begin 
until you are enrolled in a Medicare Part D plan or Medicare Advantage 
plan with prescription drug coverage. If you file your application for 
the subsidy before the month you are enrolled in a Medicare Part D plan 
or Medicare Advantage plan with prescription drug coverage, the 
earliest month you can be eligible for the subsidy is the month you are 
enrolled in such a plan.
    These proposed rules apply when you file for a Medicare Part D 
subsidy with SSA. As a condition of eligibility for the subsidy, 
section 1860D-14(a)(3) of the Act requires that you, or your personal 
representative (as defined in 42 CFR 423.772), file an application with 
SSA or a State office that accepts Medicaid applications. The SSA 
application may be printed in paper form, completed by SSA employees on 
computer screens, or available on SSA's Internet Web site. When you 
file an application, we will give you a determination of your 
eligibility, with appeal rights, on your eligibility for the subsidy 
and if eligible for the subsidy, on whether you should receive a full 
or partial subsidy. Timely filing also assures that you can receive the 
subsidy for any months you are eligible. If you inquire orally or in 
writing about the subsidy and tell us you want to file a subsidy 
application or if you partially complete the subsidy application on 
SSA's Internet Web site, we will use, where the requirements set forth 
in Sec.  418.3230 are met, the date of your inquiry or the date we 
receive from our Web site a partially completed Internet subsidy 
application as your filing date for the subsidy.
    Your application for the subsidy remains in effect until we make a 
final determination on it. A determination does not become final until 
a decision has been made on any appeal you have filed under this 
subpart. If you are not enrolled in a Medicare Part D plan or Medicare 
Advantage plan with prescription drug coverage when you file your 
subsidy application, we will write and tell you about your eligibility 
for the subsidy and that you must be enrolled in such a plan in order 
to receive a subsidy. If you are not enrolled in a plan when we 
redetermine your eligibility, we will terminate your subsidy and you 
will have to file a new subsidy application.

How We Evaluate Your Income

    Section 1860D-14(a)(1)-(3) of the Act establishes income limits for 
eligibility for the Medicare Part D subsidy. Therefore, we are 
proposing to require you to provide information about the income you 
receive. If you are married and living with your spouse, we will also 
require you to provide information about your spouse's income. These 
proposed rules explain what we consider income, what we exclude from 
income counting, and how we will compute the amount of an individual's 
countable income.
    We will count both earned income and unearned income. Earned income 
consists of wages and net earnings from self-employment. Unearned 
income is any income that is not wages or net earnings from self-
employment. Unearned income includes Social Security benefits, Veterans 
benefits, public and private pensions, annuities, and any support and 
maintenance provided to you.
    We will not count all of the money you receive when we determine 
your eligibility for the subsidy. We will apply certain exclusions to 
income you receive when we determine countable income. As directed by 
the new legislation, these exclusions are modeled after the exclusions 
used in the SSI program. For example, we will exclude up to $20 per 
month ($240 per year) of your unearned income. We will exclude from 
unearned income up to $60 per calendar quarter of income that is 
irregular or infrequent; e.g., cash received as a birthday gift and up 
to $30 per calendar quarter of earned income that is irregular or 
infrequent. We will also exclude interest earned on resources that we 
count.
    We will exclude up to $65 per month ($780 per year) and one-half of 
the

[[Page 10560]]

remainder of your earned income (or your and your spouse's combined 
earned income). We also will exclude a portion of earned income if you 
are disabled and have expenses related to your impairment that you must 
pay in order for you to work. We call these expenses impairment-related 
work expenses. Similarly, we will exclude a portion of your earned 
income if you are blind and have expenses that must be paid in order 
for you to work. We will apply these exclusions based on these 
percentages in lieu of determining the actual work related expense in 
each case. The amount we exclude will be equal to the average 
percentage of gross earnings excluded for SSI recipients who have such 
expenses. Initially, the exclusion for impairment-related work expenses 
will be 16.3 percent of the gross earnings; the exclusion for blind 
work expenses will be 25 percent of the gross earnings. However, if you 
have expenses that exceed the average, we will give you the opportunity 
to present evidence of your actual expenses and adjust the amount of 
earned income excluded accordingly. We may adjust the percentages if 
the average percentage of gross earnings excluded for SSI recipients 
changes. If we make such a change we will publish a notice in the 
Federal Register.

How We Evaluate Your Resources

    Section 1860D-14(a)(3)(D) of the Act establishes resource limits 
for eligibility for the Medicare Part D subsidy. Therefore, we are 
proposing to require you to provide information about your resources. 
If you are married and living with your spouse, we also will require 
you to provide information about your spouse's resources. These 
proposed rules explain what resources we will count and what resources 
we will not count; i.e., exclude from counting. As directed by the new 
legislation, the resource exclusions are modeled after the resource 
exclusions in the SSI program.
    We will count liquid resources, which are cash and other property 
that normally can be converted to cash within 20 workdays. Liquid 
resources can include stocks, bonds, mutual fund shares, insurance 
policies, and financial institution accounts, including checking and 
savings accounts or retirement accounts, such as individual retirement 
accounts and 401(k) accounts. We also will count the equity value of 
real property that you own except for the home that is your principal 
place of residence.

Verification

    We will compare the information you provide on your application to 
information in our records and information we obtain from other Federal 
agencies. If necessary, we will contact you to reconcile any 
discrepancies between the information on your application and the 
information from the Federal agencies. We may ask you to submit 
documents, such as bank statements, to resolve discrepancies.

Changes in Your Subsidy

    Section 1860D-14(a)(3)(B)(iv) of the Act requires us to 
periodically redetermine your continuing subsidy eligibility. During 
those redeterminations, we will reevaluate your income and resources to 
see if you continue to be eligible for a subsidy. If you are still 
eligible there may be an increase or decrease in the amount of your 
subsidy. These rules explain how we propose to make adjustments to or 
to terminate subsidies as a result of periodic redeterminations or 
redeterminations based on reports of death, marriage, divorce, 
annulment, and separation. Any determinations made as a result of 
changes in your circumstances will be a new initial determination, and 
we will notify you of the determination in writing and explain your 
right to appeal that determination.

If You Disagree With Our Determination of Your Subsidy

    Section 1860D-14(a)(3)(B)(iv)(II) of the Act requires us to 
establish appeal procedures for subsidy eligibility determinations 
similar to the current appeal process for the SSI program. The 
procedures in these proposed rules will apply only if we, not a State 
Medicaid agency, make the initial determination. We are proposing a 
process for you to appeal our eligibility determination on your subsidy 
application, and our determinations of whether you can receive a full 
or partial subsidy, of an adjustment of a subsidy, or of a termination 
of your subsidy eligibility. We also explain the rights of your spouse 
whose eligibility could be adversely affected by your appeal. In these 
proposed rules, the term ``the appeal process,'' means the same as 
``the administrative review process,'' and we use these terms 
interchangeably throughout.
    The administrative review process we are proposing will provide you 
one level of administrative review. Under these proposed rules, if you 
decide you want to appeal, you may choose between either a hearing via 
telephone or a case review. Both the telephone hearing and the case 
review are at the same level of the appeals process. You will have an 
opportunity to review the information we use in making a decision and 
to give us more information that you may want us to consider. You can 
also have witnesses at your hearing, if you choose.
    In addition, you can have a personal representative help you with 
your appeal or represent you. CMS regulations (42 CFR 423.772), which 
we will apply here, define a personal representative as:
     An individual who is authorized to act on behalf of the 
applicant;
     If the applicant is incapacitated or incompetent, someone 
acting responsibly on his or her behalf, or
     An individual of the applicant's choice who is requested 
by the applicant to act as his or her representative in the application 
process.
    We will work with your representative just as we would work with 
you.
    You must contact us within 60 days of the date you receive notice 
of the initial determination to ask for an appeal of your subsidy 
determination. If you miss the deadline for requesting appeal, you can 
request more time if you can show us you have good cause for missing 
the deadline. Once we make a decision on your appeal or dismiss your 
request for an appeal for the reason(s) cited in these proposed rules, 
we will send you a written notice explaining our decision. If you are 
dissatisfied with our initial decision, you may file an action in 
Federal district court.
    The issues that we will review are the issues with which you 
disagree. We may consider other issues, but we will provide you with 
advance notice of these other issues as explained in Sec.  418.3625.

Explanation of Proposed Part 418

    Proposed part 418 would consist of four subparts. We propose to 
reserve subparts A-C for future use. We also propose to add a new 
subpart D, Medicare Part D Subsidies, which would contain the rules 
that we use to make determinations and decisions about eligibility for 
the subsidy. In the following sections of the regulatory text of these 
proposed rules, we cite cross-references to sections in CMS' final 
rules published on January 28, 2005 at 70 FR 4193: Sec. Sec.  418.3001, 
418.3010, 418.3101, 418.3105, 418.3120, 418.3215, 418.3220, 418.3225 
and 418.3230.
    Following is a description of each section for proposed subpart D.

[[Page 10561]]

Introduction, General Provisions, and Definitions

     Section 418.3001 describes what subpart D is about, lists 
the groups of sections, and the subject of each group.
     Section 418.3005 explains that the purpose of the subsidy 
program is to offer help with prescription drug costs to individuals 
with limited financial means who meet specific requirements.
     Section 418.3010 contains definitions of terms used 
throughout this subpart.

Eligibility for a Medicare Prescription Drug Subsidy

     Section 418.3101 lists the requirements that you must meet 
to establish eligibility for a subsidy.
     Section 418.3105 provides a cross-reference to CMS' 
regulations concerning who does not need to file an application for a 
subsidy.
     Section 418.3110 explains what happens when you apply for 
a subsidy.
     Section 418.3115 describes what will prevent you from 
becoming eligible for a subsidy, even if you meet the requirements in 
Sec.  418.3101.
     Section 418.3120 describes the changes in your 
circumstances that may affect your eligibility for a subsidy or whether 
you can receive a full or partial subsidy, explains when we may make a 
redetermination of your eligibility when your circumstances change, and 
explains that we will notify you of our determination.
     Section 418.3123 explains when a change in your subsidy is 
effective.
     Section 418.3125 defines the term ``redetermination'' and 
explains when we conduct redeterminations.

Filing of Applications

     Section 418.3201 explains that an application is usually 
necessary for a subsidy and why.
     Section 418.3205 explains when an application for a 
subsidy becomes a claim for a subsidy.
     Section 418.3210 describes an application for a subsidy.
     Section 418.3215 explains who may file an application for 
a subsidy.
     Section 418.3220 explains when we consider an application 
for a subsidy filed and lists places it can be filed.
     Section 418.3225 explains how long an application for a 
subsidy will remain in effect.
     Section 418.3230 explains when we will use the date you 
make an oral or written inquiry indicating your intent to file for the 
subsidy as your subsidy application filing date.

Income

     Section 418.3301 provides the general definition of income 
that will be used for subsidy determinations.
     Section 418.3305 provides a general description of what is 
not considered income for purposes of determining eligibility for a 
subsidy and if eligible, whether you should receive a full or partial 
subsidy.
     Section 418.3310 explains whose income will be counted 
when we determine eligibility for a subsidy and if eligible, whether 
you should receive a full or partial subsidy.
     Section 418.3315 describes earned income.
     Section 418.3320 explains how we count earned income, 
including when it is considered received, how we count net earnings 
from self-employment, how we count royalties and honoraria, and how we 
determine the time periods for which the earned income is counted.
     Section 418.3325 explains that not all earned income will 
be counted and lists the earned income exclusions that may apply.
     Section 418.3330 provides the general definition of 
unearned income.
     Section 418.3335 describes the types of unearned income 
that will be counted.
     Section 418.3340 describes how we count unearned income, 
including when it is considered received, how we determine how much of 
your income is countable, and how we determine the time periods for 
which the unearned income is counted.
     Section 418.3345 explains how we will determine the value 
of unearned income, if any, received in the form of in-kind support and 
maintenance.
     Section 418.3350 explains that not all unearned income is 
countable and lists the exclusions that may apply.

Resources

     Section 418.3401 provides the general definition of 
resources that will be used for purposes of subsidy eligibility 
determinations.
     Section 418.3405 describes the types of resources that are 
considered for purposes of subsidy eligibility determinations and lists 
the type of resources that are considered liquid.
     Section 418.3410 explains whose resources will be counted.
     Section 418.3415 explains that we determine the value of 
countable resources as of the first day of the month for which a 
determination will be made.
     Section 418.3420 explains how we count funds held in 
financial institution accounts.
     Section 418.3425 provides a list of assets that will not 
be counted as resources.

Adjustments and Terminations

     Section 418.3501 explains the types of events that could 
cause us to increase or reduce your subsidy or to terminate your 
eligibility for a subsidy.
     Section 418.3505 describes the effects of increases, 
reductions, and terminations of subsidies.
     Section 418.3510 explains that before we increase, reduce, 
or terminate your subsidy, we must send you a written notice with 
appeal rights.
     Section 418.3515 explains that after we terminate a 
subsidy, you must generally file a new application to be eligible for a 
subsidy again.

Determinations and the Administrative Review Process

     Section 418.3601 explains your rights and your spouse's 
rights under the administrative review process.
     Section 418.3605 explains that initial determinations are 
determinations we make that are subject to administrative and judicial 
review and provides examples of determinations that are initial 
determinations.
     Section 418.3610 lists administrative actions that are not 
initial determinations. Although we may review these actions, they are 
not subject to administrative or judicial review.
     Section 418.3615 explains that we will mail you a notice 
whenever we make an initial determination in your case. The notice will 
tell you what our determination is, our reasons for making the 
determination, and your right to request an appeal of the 
determination.
     Section 418.3620 explains that an initial determination is 
binding unless you request an appeal within the stated time period.
     Section 418.3625 describes the administrative review 
process. This section also explains that if you are dissatisfied with 
our final decision, you may request judicial review.
     Section 418.3630 explains how to file a request for a 
hearing and that you may ask for more time to request your appeal if 
you had good cause for missing the 60-day deadline.
     Section 418.3635 explains who can request administrative 
review on your behalf.
     Section 418.3640 explains the standards we follow in 
determining whether you had good cause for missing the 60-day deadline 
to request a review.
     Section 418.3645 explains under what circumstances the 
decision-maker may be disqualified.

[[Page 10562]]

     Section 418.3650 explains that we make a decision based on 
the information we have and any other information you provide.
     Section 418.3655 explains that we will send you a notice 
of our decision on the appeal that gives you the right to judicial 
review.
     Section 418.3665 explains under what circumstances your 
request for administrative review may be dismissed.
     Section 418.3670 explains how we will notify you if your 
request for administrative review is dismissed.
     Section 418.3675 explains that our final decision on 
appeal is binding unless you request judicial review within the stated 
time.
     Section 418.3680 explains what happens if a Federal court 
remands your case to the Commissioner.

Clarity of These Proposed Rules

    Executive Order 12866, as amended by Executive Order 13258, 
requires each agency to write all rules in plain language. In addition 
to comments you may have on these proposed rules, we also invite your 
comments on how to make the rules easier to understand. For example:
     Have we organized the material to suit your needs?
     Are the requirements in the rules clearly stated?
     Do the rules contain technical language or jargon that is 
not clear?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the rules easier to understand?
     Would more (but shorter) sections be better?
     Could we improve clarity by adding tables, lists, or 
diagrams?
     What else could we do to make the rules easier to 
understand?

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these proposed rules meet the criteria for a 
significant regulatory action under Executive Order 12866, as amended 
by Executive Order 13258. Thus, they were reviewed by OMB. Any effect 
on the economy is attributable to the legislation, not to these 
proposed rules. For an analysis of the economic impact of the entire 
Medicare Part D program, see CMS' final rules published in the Federal 
Register on January 28, 2005 at 70 FR 4193.

Regulatory Flexibility Act

    We certify that these proposed rules will not have a significant 
economic impact on a substantial number of small entities as they 
affect individuals only. Therefore, a regulatory flexibility analysis 
as provided in the Regulatory Flexibility Act, as amended, is not 
required for these proposed rules. However, for an analysis of the 
economic impact of the entire Medicare Part D program, see CMS' final 
rules published in the Federal Register on January 28, 2005 at 70 FR 
4193.

Federalism Impact and Unfunded Mandates Impact

    We have reviewed these proposed rules under the threshold criteria 
of Executive Order 13132 and the Unfunded Mandates Reform Act and have 
determined that they do not have substantial direct effects on the 
States, on the relationship between the national government and the 
States, on the distribution of power and responsibilities among the 
various levels of government, or on imposing any costs on State, local, 
or tribal governments. These proposed rules do not affect the roles of 
the State, local, or tribal governments but rather, offer an option as 
intended by the legislation, i.e., whether to apply for a subsidy to 
SSA or to the States. For an analysis of the Federalism and Unfunded 
Mandates impact of the entire Medicare Part D program, see CMS' final 
rules published in the Federal Register on January 28, 2005 at 70 FR 
4193.

Paperwork Reduction Act

    These proposed rules contain reporting requirements as shown in the 
following table. Where the public reporting burden is accounted for in 
Information Collection Requests for the various forms that the public 
uses to submit the information to SSA, a 1-hour placeholder burden is 
being assigned to the specific reporting requirement(s) contained in 
these rules.

----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                                                  Annual  number   Frequency  of    burden per       Estimated
                     Section                       of  responses     response        response     annual  burden
                                                                                     (minutes)        (hours)
----------------------------------------------------------------------------------------------------------------
Sec.   418.3120.................................  ..............  ..............  ..............               1
Sec.  Sec.   418.3201, 418.3210, 418.3215,        ..............  ..............  ..............               1
 418.3220 & 418.3225............................
Sec.   418.3515.................................  ..............  ..............  ..............               1
Sec.   418.3625(b)..............................  ..............  ..............  ..............               1
Sec.   418.3625(c)..............................           5,625               1               5             469
Sec.   418.3635.................................  ..............  ..............  ..............               1
Sec.   418.3645.................................              37               1              20              12
Sec.   418.3665(a)..............................             375               1               5              31
Sec.   418.3670.................................              19               1              10               3
                                                 -----------------
    Total.......................................  ..............  ..............  ..............             520
----------------------------------------------------------------------------------------------------------------

    An Information Collection Request has been submitted to OMB for 
clearance. We are soliciting comments on the burden estimate; the need 
for the information; its practical utility; ways to enhance its 
quality, utility, and clarity; and on ways to minimize the burden on 
respondents, including the use of automated collection techniques or 
other forms of information technology. Comments should be submitted 
and/or faxed to OMB and SSA at the following addresses/numbers:

Office of Management and Budget, Attn: Desk Officer for SSA, Fax 
Number: 202-395-6974.
Social Security Administration, Attn: SSA Reports Clearance Officer, 
Rm. 1338 Annex Building, 6401 Security Boulevard, Baltimore, MD 21235-
6401, Fax Number: 410-965-6400.

    Comments can be received for up to 60 days after publication of 
this notice and will be most useful if received within 30 days of 
publication. To receive a copy of the OMB clearance package, you may 
call the SSA Reports Clearance Officer at 410-965-0454.

(Catalog of Federal Domestic Assistance Program Nos. 93.773, 
Medicare--Hospital Insurance and 93.774, Medicare--Supplementary 
Medical Insurance Program)


[[Page 10563]]



List of Subjects in 20 CFR Part 418

    Administrative practice and procedure, Aged, Blind, Disability 
benefits, Public assistance programs, Reporting and recordkeeping 
requirements, Supplemental Security Income (SSI), Medicare subsidies.

    Dated: November 23, 2004.
Jo Anne B. Barnhart,
Commissioner of Social Security.
    For the reasons set out in the preamble, we propose to add a new 
part 418 to chapter III of title 20 of the Code of Federal Regulations 
as follows:

PART 418--MEDICARE SUBSIDIES

Subparts A-C--[Reserved]

Subpart D--Medicare Part D Subsidies

Introduction, General Provisions and Definitions

Sec.
418.3001 What is this subpart about?
418.3005 Purpose and administration of the program.
418.3010 Definitions.

Eligibility for a Medicare Prescription Drug Subsidy

418.3101 How do you become eligible for a subsidy?
418.3105 Who does not need to file an application for a subsidy?
418.3110 What happens when you apply for a subsidy?
418.3115 What events will prevent you from becoming eligible for a 
subsidy?
418.3120 What happens if your circumstances change after we 
determine you are eligible for a subsidy?
418.3123 When is a change in your subsidy effective?
418.3125 What are redeterminations?

Filing of Application

418.3201 Must you file an application to become eligible for a 
subsidy?
418.3205 What makes an application a claim for a subsidy?
418.3210 What is a prescribed application for a subsidy?
418.3215 Who may file your application for a subsidy?
418.3220 When is your application considered filed?
418.3225 How long will your application remain in effect?
418.3230 When will we use your subsidy inquiry as your filing date?

Income

418.3301 What is income?
418.3305 What is not income?
418.3310 Whose income do we count?
418.3315 What is earned income?
418.3320 How do we count your earned income?
418.3325 What earned income do we not count?
418.3330 What is unearned income?
418.3335 What types of unearned income do we count?
418.3340 How do we count your unearned income?
418.3345 How do we determine the value of in-kind support and 
maintenance?
418.3350 What types of unearned income do we not count?

Resources

418.3401 What are resources?
418.3405 What types of resources do we count?
418.3410 Whose resources do we count?
418.3415 How do we determine countable resources?
418.3420 How are funds held in financial institution accounts 
counted?
418.3425 What resources do we exclude from counting?

Adjustments and Terminations

418.3501 What could cause us to increase or reduce your subsidy or 
terminate your subsidy eligibility?
418.3505 How would an increase, reduction or termination affect you?
418.3510 When would an increase, reduction or termination start?
418.3515 How could you qualify for a subsidy again?

Determinations and the Administrative Review Process

418.3601 When do you have the right to administrative review?
418.3605 What is an initial determination?
418.3610 Is there administrative or judicial review for 
administrative actions that are not initial determinations?
418.3615 Will we mail you a notice of the initial determination?
418.3620 What is the effect of an initial determination?
418.3625 What is the process for administrative review?
418.3630 How do you request administrative review?
418.3635 Can anyone request administrative review on your behalf?
418.3640 How do we determine if you had good cause for missing the 
deadline to request administrative review?
418.3645 Can you request that the decision-maker be disqualified?
418.3650 How do we make our decision upon review?
418.3655 How will we notify you of our decision after our review?
418.3665 Can your request for a hearing or case review be dismissed?
418.3670 How will you be notified of the dismissal?
418.3675 How does our decision affect you?
418.3680 What happens if your case is remanded by a Federal court?
Subparts A-C--[Reserved]
Subpart D--Medicare Part D Subsidies

    Authority: Secs. 702(a)(5) and 1860D-1, 1860D-14 and -15 of the 
Social Security Act (42 U.S.C. 902(a)(5), 1395w-101, 1395w-114, and 
-115).

Introduction, General Provisions, and Definitions


Sec.  418.3001  What is this subpart about?

    This subpart D (Regulations No. 18 of the Social Security 
Administration (SSA)) relates to sections 1860D-1 through 1860D-24 of 
title XVIII of the Social Security Act (the Act) as added by section 
101 of the Medicare Prescription Drug, Improvement, and Modernization 
Act of 2003 (Public Law 108-173). Sections 1860D-1 through 1860D-24 
established Part D of title XVIII of the Social Security Act to create 
a Medicare program known as the Voluntary Prescription Drug Benefit 
Program. Section 1860D-14, codified into the Act by section 101, 
includes a provision for subsidies of prescription drug premiums and of 
Part D cost-sharing requirements for Medicare beneficiaries whose 
income and resources do not exceed certain levels. The regulations in 
this subpart explain how we decide whether you are eligible for a Part 
D premium subsidy as defined in 42 CFR 423.780 and cost-sharing subsidy 
as defined in 42 CFR 423.782. The rules are divided into the following 
groups of sections according to subject content.
    (a) Sections 418.3001 through 418.3010 contain the introduction, a 
statement of the general purpose underlying the subsidy program for the 
Voluntary Prescription Drug Benefit Program under Medicare Part D, 
general provisions that apply to the subsidy program, a description of 
how we administer the program, and definitions of terms that we use in 
this subpart.
    (b) Sections 418.3101 through 418.3125 contain the general 
requirements that you must meet in order to be eligible for a subsidy. 
These sections set forth the subsidy eligibility requirements of being 
entitled to Medicare, of having income and resources below certain 
levels, and of filing an application. These sections also explain when 
we will redetermine your eligibility for a subsidy and the period 
covered by a redetermination.
    (c) Sections 418.3201 through 418.3230 contain the rules that 
relate to the filing of subsidy applications.
    (d) Sections 418.3301 through 418.3350 contain the rules that 
explain how we consider your income (and your spouse's income, if 
applicable) and define what income we count when we decide whether you 
are eligible for a subsidy.
    (e) Sections 418.3401 through 418.3425 contain the rules that 
explain how we consider your resources (and your spouse's resources, if 
applicable) and define what resources we count

[[Page 10564]]

when we decide whether you are eligible for a subsidy.
    (f) Sections 418.3501 through 418.3515 contain the rules that 
explain when we will adjust or when we will terminate your eligibility 
for a subsidy.
    (g) Sections 418.3601 through 418.3670 contain the rules that we 
apply when you appeal our determination regarding your subsidy 
eligibility or our determination of whether you should receive a full 
or partial subsidy.


Sec.  418.3005  Purpose and administration of the program.

    The purpose of the subsidy program is to offer help with the costs 
of prescription drug coverage for individuals who meet certain income 
and resources requirements under the law as explained in this subpart. 
The Centers for Medicare & Medicaid Services (CMS) in the Department of 
Health and Human Services has responsibility for administration of the 
Medicare program, including the new Medicare Part D Voluntary 
Prescription Drug Benefit Program. We provide information through 
notices to beneficiaries about the Voluntary Prescription Drug Benefit 
Program under Medicare Part D, notify Medicare beneficiaries who appear 
to have limited income, based on our records, about the availability of 
the subsidy if they are not already eligible for this help, and take 
applications for and determine the eligibility of individuals for a 
subsidy.


Sec.  418.3010  Definitions.

    (a) Terms relating to the Act and regulations. (1) We, our or us 
means the Social Security Administration (SSA).
    (2) The Act means the Social Security Act, as amended.
    (3) Title means a title of the Act.
    (4) Section means a section of the regulations in part 418 of this 
chapter unless the context indicates otherwise.
    (5) CMS means the Centers for Medicare & Medicaid Services in the 
Department of Health and Human Services.
    (6) Commissioner means the Commissioner of Social Security.
    (b) Miscellaneous. (1) Claimant means the person on whose behalf an 
application is filed.
    (2) Date you receive a notice means five calendar days after the 
date on the notice, unless you show us you did not receive it within 
the five-day period.
    (3) Determination means the initial determination that we make as 
defined in Sec.  418.3605.
    (4) Decision means the decision we make after a hearing.
    (5) Family size, for purposes of this subpart, means family size as 
defined in 42 CFR 423.772.
    (6) Federal poverty line, for purposes of this subpart, has the 
same meaning as Federal poverty line in 42 CFR 423.772.
    (7) Full-benefit dual eligible individual, for purposes of this 
subpart, has the same meaning as full benefit dual eligible individual 
in 42 CFR 423.772.
    (8) Medicare beneficiary means an individual who is entitled to or 
enrolled in Medicare Part A benefits (Hospital Insurance) or enrolled 
in Part B (Supplementary Medical Insurance) or both.
    (9) Periods of limitations ending on Federal nonworkdays. Title 
XVIII of the Act and regulations in this subpart require you to take 
certain actions within specified time periods or you may lose your 
right to a portion of or your entire subsidy. If any such period ends 
on a Saturday, Sunday, Federal legal holiday, or any other day all or 
part of which is declared to be a nonworkday for Federal employees by 
statute or Executive Order, you will have until the next Federal 
workday to take the prescribed action.
    (10) Representative or personal representative means personal 
representative as defined in 42 CFR 423.772
    (11) Subsidy means an amount CMS will pay on behalf of Medicare 
beneficiaries who are eligible for a subsidy of their Medicare Part AD 
costs. The amount of a subsidy for a Medicare beneficiary depends on 
the beneficiary's income, resources, and late enrollment penalties (if 
any) as explained in 42 CFR 423.780 and 42 CFR 423.782. We do not 
determine the amount of the subsidy, only whether or not the individual 
is eligible for a full or partial subsidy.
    (12) Subsidy eligible individual, for purposes of this subpart, has 
the same meaning as subsidy eligible individual as defined in 42 CFR 
423.773.
    (13) State, unless otherwise indicated, means:
    (i) A State of the United States; or
    (ii) The District of Columbia.
    (14) United States when used in a geographical sense means:
    (i) The 50 States; and
    (ii) The District of Columbia.
    (15) You or your means the person for whom an application is filed.

Eligibility for a Medicare Prescription Drug Subsidy


Sec.  418.3101  How do you become eligible for a subsidy?

    Unless you are deemed eligible as explained in Sec.  418.3105 and 
42 CFR 423.773(c), you are eligible for a Medicare Part D prescription 
drug subsidy if you meet all of the following requirements:
    (a) You are entitled to benefits under Medicare Part A (Hospital 
Insurance) and/or enrolled in Medicare Part B (Supplementary Medical 
Insurance) under title XVIII of the Act.
    (b) You are enrolled in a Medicare prescription drug plan or 
Medicare Advantage plan with prescription drug coverage. We can also 
determine your eligibility for a subsidy before you enroll in one of 
the above programs. However, as explained in Sec.  418.3225(b), if we 
determine that you would be eligible for a subsidy before you have 
enrolled in a Medicare prescription drug plan or Medicare Advantage 
plan with prescription drug coverage, you must enroll in one of these 
plans to actually receive a subsidy.
    (c) You reside in the United States as defined in Sec.  418.3010.
    (d) You (and your spouse, if applicable) meet the income 
requirements as explained in Sec. Sec.  418.3301 through 418.3350 and 
42 CFR 423.773.
    (e) You (and your spouse, if applicable) meet the resources 
requirements as explained in Sec. Sec.  418.3401 through 418.3425 and 
42 CFR 423.773.
    (f) You or your personal representative file an application for a 
subsidy as explained in Sec. Sec.  418.3201 through 418.3230.


Sec.  418.3105  Who does not need to file an application for a subsidy?

    Regulations in 42 CFR 423.773(c) explain who is deemed eligible and 
does not need to file an application for a subsidy to be eligible for 
this assistance.


Sec.  418.3110  What happens when you apply for a subsidy?

    (a) When you or your personal representative apply for a subsidy, 
we will ask for information that we need to determine if you meet all 
the requirements for a subsidy. You must give us complete information. 
If, based on the information you present to us, you do not meet all the 
requirements for eligibility listed in Sec.  418.3101, or if one of the 
events listed in Sec.  418.3115 exists, or you fail to submit 
information we request, we will deny your claim.
    (b) If you meet all the requirements for eligibility listed in 
Sec.  418.3101, or you meet all the requirements except for enrollment 
in a Medicare Part D plan or Medicare Advantage plan with prescription 
drug coverage, we will send you a notice telling you the following:

[[Page 10565]]

    (1) You are eligible for a full or partial subsidy for a period not 
to exceed 1 year;
    (2) What information we used to make this determination including 
how we calculated your income and resources;
    (3) How to ask us to redetermine your subsidy eligibility;
    (4) What you may do if your circumstances change; and
    (5) Your appeal rights.
    (c) If you are not already enrolled with a Medicare prescription 
drug plan or a Medicare Advantage plan with prescription drug coverage, 
you must enroll in order to receive your subsidy. If you are not 
enrolled in a plan when we redetermine your eligibility per Sec.  
418.3125, we will terminate your subsidy and you will need to file a 
new application as stated in Sec.  418.3225.
    (d) If you do not meet all the requirements for eligibility listed 
in Sec.  418.3101 or if Sec.  418.3115 applies to you except for 
enrollment in a Medicare Part D plan or Medicare Advantage plan with 
prescription drug coverage as described in Sec.  418.3225, we will send 
you a notice telling you the following:
    (1) You are not eligible for a subsidy;
    (2) The information we used to make this determination including 
how we calculated your income or resources;
    (3) You may reapply if your situation changes; and
    (4) Your appeal rights.


Sec.  418.3115  What events will prevent you from becoming eligible for 
a subsidy?

    Generally, even if you meet the other requirements in Sec. Sec.  
418.3101 through 418.3125, we will deny your claim or you will lose 
your eligibility for a subsidy if any of the following apply to you:
    (a) You lose entitlement to or are not enrolled in Medicare Part A 
or are not enrolled in Medicare Part B.
    (b) You do not enroll or lose your enrollment in a Medicare Part D 
plan or Medicare Advantage plan with prescription drug coverage.
    (c) You do not give us information we need to determine your 
eligibility and if eligible, whether you should receive a full or 
partial subsidy; or you do not give us information we need to determine 
whether you continue to be eligible for a subsidy and if eligible, 
whether you should receive a full or partial subsidy.
    (d) You knowingly give us false or misleading information.


Sec.  418.3120  What happens if your circumstances change after we 
determine you are eligible for a subsidy?

    (a) After we determine that you are eligible for a subsidy, your 
subsidy eligibility could change if:
    (1) You marry.
    (2) You and your spouse, who lived with you, divorce.
    (3) Your spouse, who lives with you, dies.
    (4) You and your spouse separate (i.e., you or your spouse move out 
of the household and you are no longer living with your spouse) unless 
the separation is a temporary absence as described in Sec.  404.347 of 
this chapter.
    (5) You and your spouse, who lives with you, have your marriage 
annulled.
    (6) You (or your spouse, who lives with you, if applicable) expect 
your estimated annual income (excluding cost-of-living adjustments in 
income from SSA, from the Railroad Retirement Board, the Department of 
Veterans Affairs, and/or from the Office of Personnel Management) to 
increase or decrease in the next calendar year.
    (7) You (or your spouse, who lives with you, if applicable) expect 
your resources to increase or decrease in the next calendar year.
    (8) Your family size as defined in 42 CFR 423.772 has changed or 
will change (other than a change resulting from one of the events in 
paragraphs (a)(1) through (5) of this section).
    (9) You become eligible for one of the programs listed in 42 CFR 
423.773(c).
    (b)(1) When you report one of the events listed in paragraphs 
(a)(1) through (a)(5) of this section, or we receive such a report from 
another source (e.g., a data exchange of reports of death), we will 
send you a redetermination form upon receipt of the report. You must 
return the completed form within 90 days of the date of the form.
    (2) When you report one of the events listed in paragraphs (a)(6) 
through (a)(8) of this section or we receive such a report from another 
source (e.g., a data exchange involving income records), we will send 
you a redetermination form between August and December to evaluate the 
change. You must return the completed form to us within 30 days of the 
date of the form.
    (3) If we increase, decrease, or terminate your subsidy as a result 
of the redetermination, we will send you a notice telling you:
    (i) Whether you can receive a full or partial subsidy as described 
in 42 CFR 423.780 and 423.782.
    (ii) How we calculated your income and resources;
    (iii) When the change in your subsidy is effective;
    (iv) Your appeal rights;
    (v) What to do if your situation changes.
    (c) If you become eligible for one of the programs listed in 42 CFR 
423.773(c), CMS will notify you of any change in your subsidy.


Sec.  418.3123  When is a change in your subsidy effective?

    (a) If we redetermine your subsidy as described in Sec.  
418.3120(b)(1), any change in your subsidy will be effective the month 
following the month of your report.
    (b) If we redetermine your subsidy as described in Sec.  
418.3120(b)(2), any change in your subsidy will be effective in January 
of the next year.
    (c) If you do not return the redetermination form described in 
Sec.  418.3120(b)(1), we will terminate your subsidy effective with the 
month following the expiration of the 90-day period described in Sec.  
418.3120(b)(1).
    (d) If you do not return the redetermination forms described in 
Sec.  418.3120(b)(2), we will terminate your subsidy effective in 
January of the next year.


Sec.  418.3125  What are redeterminations?

    (a) Redeterminations defined. A redetermination is a periodic 
review of your eligibility to make sure that you are still eligible for 
a subsidy and if so, to determine whether you should continue to 
receive a full or partial subsidy. This review deals with evaluating 
your income and resources (and those of your spouse, who lives with 
you) and will not affect past months of eligibility. It will be used to 
determine your future subsidy eligibility and whether you should 
receive a full or partial subsidy for future months. We will 
redetermine your eligibility if we made the initial determination of 
your eligibility or if you are deemed eligible because you receive SSI 
benefits. Rules regarding redeterminations of initial eligibility 
determinations made by a State are described in 42 CFR 423.774.
    (b) When we make redeterminations. (1) We will redetermine your 
subsidy eligibility within one year of our final determination of your 
eligibility for the subsidy.
    (2) After the first redetermination, we will redetermine your 
subsidy eligibility at intervals determined by the Commissioner. The 
length of time between redeterminations varies depending on the 
likelihood that your situation may change in a way that affects your 
eligibility and whether you should receive a full or partial subsidy.
    (3) We may also redetermine your eligibility and whether you should 
receive a full or partial subsidy when you tell us of a change in your 
circumstances described in Sec.  418.3120.
    (4) We may redetermine your eligibility when we receive information

[[Page 10566]]

from you or from data exchanges with Federal and State agencies that 
may affect whether you should receive a full or partial subsidy or your 
eligibility for the subsidy.
    (5) We will also redetermine eligibility on a random sample of 
cases for quality assurance purposes. For each collection of sample 
cases, all factors affecting eligibility and/or whether you should 
receive a full or partial subsidy may be verified by contact with 
primary repositories of information relevant to each individual factor 
(e.g., we may contact employers to verify wage information). 
Consequently, we may contact a variety of other sources, in addition to 
recontacting you, to verify the completeness and accuracy of our 
information.

Filing of Application


Sec.  418.3201  Must you file an application to become eligible for a 
subsidy?

    Unless you are a person covered by Sec.  418.3105, in addition to 
meeting other requirements, you or your personal representative must 
file an application to become eligible for a subsidy. If you believe 
you may be eligible for a subsidy, you should file an application. 
Filing a subsidy application does not commit you to participate in the 
Part D program.
    Filing an application will:
    (a) Permit us to make a formal determination on your eligibility 
for the subsidy and whether you should receive a full or partial 
subsidy;
    (b) Assure that you can receive the subsidy for any months that you 
are eligible and are enrolled in a Medicare Part D plan or Medicare 
Advantage plan with prescription drug coverage; and
    (c) Give you the right to appeal if you disagree with our 
determination.


Sec.  418.3205  What makes an application a claim for a subsidy?

    We will consider your application a claim for the subsidy if:
    (a) You, or someone acting on your behalf as described in Sec.  
418.3215, complete an application on a form prescribed by us;
    (b) You, or someone acting on your behalf as described in Sec.  
418.3215, file the application with us pursuant to Sec.  418.3220; and
    (c) You are alive at the time it is filed.


Sec.  418.3210  What is a prescribed application for a subsidy?

    If you choose to apply with SSA, you must file for the subsidy on 
an application prescribed by us. A prescribed application may include a 
printed form, an application our employees complete on computer 
screens, or an application available online at www.socialsecurity.gov 
on the SSA Internet Web site. See Sec.  418.3220 for places where an 
application for the subsidy may be filed and when it is considered 
filed.


Sec.  418.3215  Who may file your application for a subsidy?

    You or your personal representative (as defined in 42 CFR 423.772) 
may complete, and file your subsidy application.


Sec.  418.3220  When is your application considered filed?

    (a) General rule. We consider an application for a subsidy as 
described in Sec.  418.3210 to be filed with us on the day it is 
received by either an SSA employee at one of our offices or an SSA 
employee who is authorized to receive it at a place other than one of 
our offices or it is considered filed on the day it is submitted 
electronically through SSA's Internet Web site. If a State Medicaid 
agency forwards to us a subsidy application that you gave to it, we 
will consider the date you submitted that application to the State 
Medicaid agency as the filing date. (See 42 CFR 423.774 for 
applications filed with a State Medicaid agency.)
    (b) Exceptions. (1) When we receive an application that is mailed, 
we will assume that we received it 5 days earlier and use the earlier 
date as the application filing date if it would result in another month 
of subsidy eligibility.
    (2) We may consider an application to be filed on the date a 
written or oral inquiry about your subsidy eligibility is made, or the 
date we receive a partially completed Internet subsidy application from 
SSA's Web site where the requirements set forth in Sec.  418.3230 are 
met.


Sec.  418.3225  How long will your application remain in effect?

    (a) Your application will remain in effect until we make a final 
determination on it. A determination does not become final until a 
decision on any appeal you have filed under this subpart is issued.
    (b) If, at the time your application is filed or before we make a 
final determination, you meet all the requirements for a subsidy as 
described in 42 CFR 423.773 except for enrollment in a Medicare Part D 
plan or Medicare Advantage plan with prescription drug coverage, we 
will send you a notice advising you of your eligibility for the subsidy 
and the requirement to enroll in such a plan. If you are not enrolled 
when we redetermine your eligibility as described in Sec.  418.3125, we 
will terminate your subsidy and you will need to file a new subsidy 
application.
    (c) If you are not entitled to Medicare Part A and/or enrolled in 
Medicare Part B at the time your subsidy application is filed and it 
appears that you may be eligible for the subsidy, we will send you a 
notice advising you that you are eligible for the subsidy provided that 
you become entitled to Medicare Part A and/or enrolled in Medicare Part 
B and enroll in a Medicare Part D plan or Medicare Advantage plan with 
prescription drug coverage. If you are not entitled to Medicare Part A 
and/or enrolled in Medicare Part B and enrolled in a Medicare Part D 
plan or Medicare Advantage plan with prescription drug coverage when we 
redetermine your eligibility as described in Sec.  418.3125, we will 
terminate your subsidy and you will need to file a new subsidy 
application and become entitled to Medicare Part A and/or enroll in 
Medicare Part B during a subsequent enrollment period.


Sec.  418.3230  When will we use your subsidy inquiry as your filing 
date?

    If you or your personal representative (as defined in 42 CFR 
423.772) make an oral or written inquiry about the subsidy, or 
partially complete an Internet subsidy application on SSA's Web site, 
we will use the date of the inquiry or the date the partial Internet 
application was started as your filing date if the following 
requirements are met:
    (a) The written or oral inquiry indicates your intent to file for 
the subsidy, or you submit a partially completed Internet application 
to us;
    (b) The inquiry, whether in person, by telephone, or in writing, is 
directed to an office or an official described in Sec.  418.3220, or a 
partially completed Internet subsidy application is received by us;
    (c) An application as defined in Sec.  418.3210 is filed by you or 
by your personal representative (as defined in 42 CFR 423.772) within 
60 days after the date of the advance notice we will send. The notice 
will say that we will make an initial determination of your 
qualifications, if an application is filed within 60 days after the 
date of the notice. We will send the notice to you. Where you are a 
minor or adjudged legally incompetent and your personal representative 
made the inquiry, we will send the notice to your personal 
representative; and
    (d) The claimant is alive when the application is filed.

[[Page 10567]]

Income


Sec.  418.3301  What is income?

    Income is anything you and your spouse, who lives with you, receive 
in cash or in-kind that you can use to meet your needs for food and 
shelter. Income can be earned income or unearned income.


Sec.  418.3305  What is not income?

    Some things you receive are not considered income because you 
cannot use them to meet your needs for food or shelter. The things that 
are not income for purposes of determining eligibility and whether you 
should receive a full or partial subsidy are described in Sec.  
416.1103 of this chapter.


Sec.  418.3310  Whose income do we count?

    (a) We count your income. If you are married and live with your 
spouse in the month you file for a subsidy, or when we redetermine your 
eligibility for a subsidy as described in Sec.  418.3125, we count your 
income and your spouse's income regardless of whether one or both of 
you apply or are eligible for the subsidy.
    (b) We will determine your eligibility based on your income alone 
if you are not married or if you are married but you are separated from 
your spouse (i.e., you or your spouse move out of the household and you 
are no longer living with your spouse) at the time you apply for a 
subsidy or when we redetermine your eligibility for a subsidy as 
described in Sec.  418.3125.
    (c) If your subsidy is based on your income and your spouse's 
income and we redetermine your subsidy as described in Sec.  
418.3120(b)(1), we will stop counting the income of your spouse in the 
month following the month that we receive a report that your marriage 
ended due to death, divorce, or annulment; or a report that you and 
your spouse stopped living together.
    (d) If your subsidy is based on your income and your spouse's 
income, we will continue counting the income of both you and your 
spouse if one of you is temporarily away from home as described in 
Sec.  404.347 of this chapter.


Sec.  418.3315  What is earned income?

    Earned income is defined in Sec.  416.1110 of this chapter and may 
be in cash or in kind. We may count more of your earned income than you 
actually receive. We count gross income, which is more than you 
actually receive, if amounts are withheld from earned income because of 
a garnishment, or to pay a debt or other legal obligation such as 
taxes, or to make any other similar payments.


Sec.  418.3320  How do we count your earned income?

    (a) Wages. We count your wages at the earliest of the following 
points: when you receive them, when they are credited to you, or when 
they are set aside for your use.
    (b) Net earnings from self-employment. We count net earnings from 
self-employment on a taxable year basis. If you have net losses from 
self-employment, we deduct them from your other earned income. We do 
not deduct the net losses from your unearned income.
    (c) Payments for services performed in a sheltered workshop or work 
activities center. We count payments you receive for services performed 
in a sheltered workshop or work activities center when you receive them 
or when they are set aside for your use.
    (d) In-kind earned income. We count the current market value of in-
kind earned income. For purposes of this part, we use the definition of 
current market value in Sec.  416.1101 of this chapter. If you receive 
an item that is not fully paid for and you are responsible for the 
unpaid balance, only the paid up value is income to you (see example in 
Sec.  416.1123(c) of this chapter).
    (e) Certain honoraria and royalties. We count honoraria for 
services rendered and royalty payments that you receive in connection 
with any publication of your work. We will consider these payments as 
available to you when you receive them, when they are credited to your 
account, or when they are set aside for your use, whichever is 
earliest.
    (f) Period for which earned income is counted. For purposes of 
determining subsidy eligibility and, if eligible, whether you should 
receive a full or partial subsidy, we consider all of the countable 
earned income you receive (or expect to receive) during the year for 
which you are applying for this subsidy. However, in the first year 
that you or your spouse apply for the subsidy, we consider all of the 
countable earned income you and your living-with spouse receive 
starting from the month that you or your living-with spouse have filed 
an application for the subsidy through the end of the calendar year. If 
we count your income for only a portion of the year, the income limit 
for subsidy eligibility will be adjusted accordingly. For example, if 
we count your income for 6 consecutive months of the year (July through 
December), the income limit for subsidy eligibility will be half of the 
income limit applicable for the full year.


Sec.  418.3325  What earned income do we not count?

    (a) While we must know the source and amount of all of your earned 
income, we do not count all of it to determine your subsidy eligibility 
and whether you should receive a full or partial subsidy. We apply 
these income exclusions in the order listed in paragraph (b) of this 
section to your income. We never reduce your earned income below zero 
or apply any unused earned income exclusion to unearned income.
    (b) For the year or partial year that we are determining your 
eligibility for the subsidy, we do not count as earned income--
    (1) Any refund of Federal income taxes you or your living-with 
spouse receive under section 32 of the Internal Revenue Code (relating 
to the earned income tax credit) and payment you receive from an 
employer under section 3507 of the Internal Revenue Code (relating to 
advance payments of earned income tax credit);
    (2) Earned income which is received infrequently or irregularly if 
the total of such income does not exceed $30 per calendar quarter.
    (3) Any portion of the $20 per month exclusion described in Sec.  
416.1124(c)(12) of this chapter which has not been excluded from your 
combined unearned income (or the combined unearned income of you and 
your living-with spouse);
    (4) $65 per month of your earned income a year (or the combined 
earned income of you and your living-with spouse receive in that same 
year);
    (5) Earned income you use to pay impairment-related work expenses 
described in Sec.  416.976 of this chapter, if you are receiving a 
social security disability insurance benefit, your disabling 
condition(s) does not include blindness and you are under age 65. We 
consider that you attain age 65 on the day before your 65th birthday. 
In lieu of determining the actual amount of these expenses, we will 
assume that the value of these work expenses is equal to a standard 
percentage of your total earned income per month if you tell us that 
you have impairment-related work expenses. The amount we exclude will 
be equal to the average percentage of gross earnings excluded for SSI 
recipients who have such expenses. Initially, the exclusion for 
impairment-related work expenses will be 16.3 percent of the gross 
earnings. We may adjust the percentages if the average percentage of 
gross earnings excluded for supplemental security income (SSI) 
recipients changes. If we make such a change we will publish a notice 
in the Federal

[[Page 10568]]

Register. If excluding impairment-related work expenses greater than 
the standard percentage of your earned income would affect your 
eligibility or subsidy amount, you may establish that your actual 
expenses are greater than the standard percentage of your total earned 
income. You may do so by contacting us and providing evidence of your 
actual expenses. The exclusion of impairment-related work expenses also 
applies to the earnings of your living-with spouse if he or she is 
receiving a social security disability insurance benefit, the disabling 
condition(s) does not include blindness and he or she is under age 65;
    (6) One-half of your remaining earned income (or combined earned 
income of you and your living-with spouse); and
    (7) Earned income you use to meet any expenses reasonably 
attributable to the earning of the income if you receive a social 
security disability insurance benefit based on blindness and you are 
under age 65. We consider that you attain age 65 on the day before your 
65th birthday. In lieu of determining the actual amount of these 
expenses, we will assume that the value of these expenses is equal to a 
standard percentage of your total earned income per month. The amount 
we exclude will be equal to the average percentage of gross earnings 
excluded for SSI recipients who have such expenses. Initially, the 
exclusion for blind work expenses will be 25 percent of the gross 
earnings. We may adjust the percentages if the average percentage of 
gross earnings excluded for SSI recipients changes. If we make such a 
change we will publish a notice in the Federal Register. If excluding 
impairment-related expenses greater than the standard percentage of 
your earned income would affect your eligibility or subsidy amount, you 
may establish that your actual expenses are greater than the standard 
percentage of your earned income. You may do so by contacting us and 
providing evidence of your actual expenses. The exclusion of work 
expenses also applies to the earnings of your living-with spouse if he 
or she receives a social security disability insurance benefit based on 
blindness and is under age 65.


Sec.  418.3330  What is unearned income?

    Unearned income is all income that is not earned income. We 
describe some of the types of unearned income we count in Sec.  
418.3335.


Sec.  418.3335  What types of unearned income do we count?

    (a) Some of the types of unearned income we count are described in 
Sec.  416.1121(a)-(g) of this chapter.
    (b) We also count in-kind support and maintenance as unearned 
income. In-kind support and maintenance is any food and shelter that is 
given to you or that you receive because someone else pays for it (see 
Sec.  418.3345).


Sec.  418.3340  How do we count your unearned income?

    (a) When income is received. We count unearned income as available 
to you at the earliest of the following points: when you receive it, 
when it is credited to your account, or when it is set aside for your 
use.
    (b) When income is counted. For purposes of determining eligibility 
and whether you should receive a full or partial subsidy, we count all 
of the unearned income you and your living-with spouse receive (or 
expect to receive) during the year for which you are applying for this 
benefit unless the income is excluded under Sec.  418.3350. However, in 
the first year you or your spouse apply for the subsidy, we count the 
unearned income both you and your living-with spouse receive (or expect 
to receive) starting from the month that you or your living-with spouse 
have filed an application for the subsidy. If we count your income for 
only a portion of the year, the income limits for subsidy eligibility 
will be adjusted accordingly. For example, if we count your income for 
6 consecutive months of the year (July through December), the income 
limit for subsidy eligibility will be half of the income limit 
applicable for the full year.
    (c) Amount considered as income. We may include more or less of 
your income than you actually receive.
    (1) We include more than you actually receive where another benefit 
payment (such as a Social Security benefit) has been reduced to recover 
an overpayment. In such a situation, you are repaying a legal 
obligation through the withholding of portions of your benefit amount, 
and the amount of this withholding is part of your unearned income.
    (2) We also include more than you actually receive if amounts are 
withheld from unearned income because of a garnishment, or to pay a 
debt or other legal obligation, or to make any other payment such as 
payment of your Medicare Part B or C premium.
    (3) We include less than you actually receive if part of the 
payment is for an expense you had in getting the payment. For example, 
if you are paid for damages you receive in an accident, we subtract 
from the amount of the payment your medical, legal, or other expenses 
connected with the accident. If you receive a retroactive check from a 
benefit program, we subtract legal fees connected with the claim. We do 
not subtract from any taxable unearned income the part you have to use 
to pay personal income taxes. The payment of taxes is not an expense 
you have in getting income.
    (d) Retroactive benefits. We count retroactive monthly benefits 
such as social security benefits as unearned income in the year you 
receive the retroactive benefits.
    (e) Certain veterans benefits. If you receive a veterans benefit 
that includes an amount paid to you because of a dependent, we do not 
count as your unearned income the amount paid to you because of the 
dependent. If you are a dependent of an individual who receives a 
veterans benefit and a portion of the benefit is attributable to you as 
a dependent, we count the amount attributable to you as your unearned 
income if you reside with the veteran or you receive your own separate 
payment from the Department of Veterans Affairs.


Sec.  418.3345  How do we determine the value of in-kind support and 
maintenance?

    (a) You can receive in-kind support and maintenance, such as food 
and shelter, if you live alone, with others, or in a facility, or in an 
institution. The amount of income you derive from in-kind support and 
maintenance is the current market value of the food and shelter 
provided to you and your living-with spouse by someone other than you 
or your living-with spouse. Shelter includes room, rent, mortgage 
payments, real property taxes, heating fuel, gas, electricity, water, 
sewerage, and garbage collection services.
    (b) The maximum amount of income we count from in-kind support and 
maintenance during a month is limited to one-third of the monthly SSI 
Federal benefit rate for an eligible individual (as described in Sec.  
416.410 of this chapter) that is in effect for the period for which you 
are applying or are eligible for a subsidy. If you are married and 
living with your spouse, the maximum amount of income you and your 
spouse receive from in-kind support and maintenance during a month is 
limited to one-third of the monthly SSI Federal benefit rate for an 
eligible couple (as described in Sec.  416.412 of this chapter). If the 
current market value of the in-kind support and maintenance you receive 
is greater than one-third of the applicable monthly SSI Federal benefit 
rate, we count only one-

[[Page 10569]]

third of the applicable monthly SSI Federal benefit rate as income.


Sec.  418.3350  What types of unearned income do we not count?

    (a) While we must know the source and amount of all of your 
unearned income, we do not count all of it to determine your 
eligibility for the subsidy. We apply to your unearned income the 
exclusions in Sec.  418.3350(b) in the order listed. However, we never 
reduce your unearned income below zero and we never apply any unused 
unearned income exclusion to earned income except for the $20 per month 
exclusion described in Sec.  416.1124(c)(12) of this chapter. For 
purposes of determining eligibility for a subsidy, and whether you 
should receive a full or partial subsidy, we treat the $20 per month 
exclusion as a $240 per year exclusion.
    (b) We do not count as income the unearned income described in 
Sec.  416.1124(c)(1) through (c)(5), (c)(7) through (c)(12), and 
(c)(14) through (c)(20) of this chapter.
    (c) We exclude unearned income which is received either 
infrequently or irregularly provided the total of such income does not 
exceed $60 per calendar quarter.
    (d) We do not count as income any dividends or interest earned on 
resources we count.

Resources


Sec.  418.3401  What are resources?

    For purposes of this subpart, resources are cash or other assets 
that an individual owns and could convert to cash to be used for his or 
her support and maintenance.


Sec.  418.3405  What types of resources do we count?

    (a) We count liquid resources. Liquid resources are cash or other 
property which can be converted to cash within 20 days, excluding 
certain nonwork days as explained in Sec.  416.120(d) of this chapter. 
Examples of resources that are ordinarily liquid are stocks, bonds, 
mutual fund shares, promissory notes, mortgages, life insurance 
policies, financial institution accounts (including savings, checking, 
and time deposits, also known as certificates of deposit), retirement 
accounts (such as individual retirement accounts (IRA), 401(k) 
accounts), and similar items.
    (b) We count the equity value of real property as a resource. 
However, we do not count the home that is your principal place of 
residence and the land on which it is situated as a resource as defined 
in Sec.  418.3425(a).


Sec.  418.3410  Whose resources do we count?

    (a) We count your resources. If you are married and live with your 
spouse in the month you file for a subsidy, or when we redetermine your 
eligibility for a subsidy as described in Sec.  418.3125, we count the 
resources of you and your spouse regardless of whether one or both of 
you apply or are eligible for the subsidy.
    (b) We will determine your eligibility based on your resources 
alone if you are not married or if you are married but you are 
separated from your spouse at the time you apply for a subsidy or at 
the time we redetermine your eligibility for a subsidy as described in 
Sec.  418.3125.
    (c) If your subsidy is based on the resources of you and your 
spouse and we redetermine your subsidy as described in Sec.  
418.3120(b)(1), we will stop counting the resources of your spouse in 
the month following the month that we receive a report that your 
marriage ended due to death, divorce, or annulment; or a report that 
you and your spouse stopped living together.
    (d) If your subsidy is based on the resources of you and your 
spouse, we will continue counting the resources of both you and your 
spouse if one of you is temporarily away from home as described in 
Sec.  404.347 of this chapter.


Sec.  418.3415  How do we determine countable resources?

    (a) General rule. Your countable resources are determined as of the 
first moment of the month for which we determine your eligibility based 
on your application for a subsidy or for which we redetermine your 
eligibility for a subsidy. A resource determination is based on what 
assets you (and your living-with spouse, if any) have, what their 
values are, and whether they are excluded as of the first moment of the 
month. We will use this amount as your countable resources at the point 
when we determine your eligibility for the subsidy unless you report to 
us that the value of your resources has changed.
    (b) Equity value. Resources, other than cash, are evaluated 
according to your (and your spouse's, if any) equity in the resources. 
For purposes of this subpart, the equity value of an item is defined as 
the price for which that item, minus any encumbrances, can reasonably 
be expected to sell on the open market in the particular geographic 
area involved.
    (c) Relationship of income to resources. Cash you receive during a 
month is evaluated under the rules for counting income during the month 
of receipt. If you retain the cash until the first moment of the 
following month, the cash is countable as a resource unless it is 
otherwise excludable.


Sec.  418.3420  How are funds held in financial institution accounts 
counted?

    (a) Owner of the account. Funds held in a financial institution 
account (including savings, checking, and time deposits also known as 
certificates of deposit) are considered your resources if you own the 
account and can use the funds for your support and maintenance. We 
determine whether you own the account and can use the funds by looking 
at how the account is held.
    (b) Individually-held account. If you are designated as the sole 
owner by the account title and you can withdraw and use funds from that 
account for your support and maintenance, all of that account's funds 
are your resource regardless of the source. For as long as these 
conditions are met, we presume that you own 100 percent of the funds in 
the account. This presumption is not rebuttable.
    (c) Jointly-held account. (1) If you are the only subsidy claimant 
or subsidy recipient who is an account holder on a jointly held 
account, we presume that all of the funds in the account belong to you. 
If more than one subsidy claimant or subsidy recipient are account 
holders, we presume that the funds in the account belong to those 
individuals in equal shares.
    (2) If you disagree with the ownership presumption as described in 
paragraph (c)(1) of this section, you may rebut the presumption. 
Rebuttal is a procedure which permits an individual to furnish evidence 
and establish that some or all of the funds in a jointly-held account 
do not belong to him or her.


Sec.  418.3425  What resources do we exclude from counting?

    In determining your resources (and the resources of your spouse, if 
any) the following items shall be excluded:
    (a) Your home. For purposes of this exclusion, a home is any 
property in which you (and your spouse, if any) have an ownership 
interest and which serves as your principal place of residence. This 
property includes the shelter in which an individual resides, the land 
on which the shelter is located, and outbuildings;
    (b) Non-liquid resources, other than real property. Non-liquid 
resources are resources that are not liquid resources as defined in 
Sec.  418.3405;
    (c) Property of a trade or business which is essential to the means 
of self-support as provided in Sec.  416.1222 of this chapter;
    (d) Nonbusiness property which is essential to the means of self-
support as provided in Sec.  416.1224 of this chapter;

[[Page 10570]]

    (e) Stock in regional or village corporations held by natives of 
Alaska during the twenty-year period in which the stock is inalienable 
pursuant to the Alaska Native Claims Settlement Act (see Sec.  416.1228 
of this chapter);
    (f) Life insurance owned by an individual (and spouse, if any) to 
the extent provided in Sec.  416.1230 of this chapter;
    (g) Restricted allotted Indian lands as provided in Sec.  416.1234 
of this chapter;
    (h) Payments or benefits provided under a Federal statute other 
than title XVIII of the Act where exclusion is required by such 
statute;
    (i) Disaster relief assistance as provided in Sec.  416.1237 of 
this chapter;
    (j) Funds up to $1,500 for the individual and $1,500 for the spouse 
who lives with the individual if these funds are set aside for burial 
expenses of the individual and spouse;
    (k) Burial spaces, as provided in Sec.  416.1231(a) of this 
chapter;
    (l) Title XVI or title II retroactive payments as provided in Sec.  
416.1233 of this chapter;
    (m) Housing assistance as provided in Sec.  416.1238 of this 
chapter;
    (n) Refunds of Federal income taxes and advances made by an 
employer relating to an earned income tax credit, as provided in Sec.  
416.1235 of this chapter;
    (o) Payments received as compensation incurred or losses suffered 
as a result of a crime, as provided in Sec.  416.1229 of this chapter;
    (p) Relocation assistance from a State or local government, as 
provided in Sec.  416.1239 of this chapter;
    (q) Dedicated financial institution accounts as provided in Sec.  
416.1247 of this chapter;
    (r) A gift to, or for the benefit of, an individual who has not 
attained 18 years of age and who has a life-threatening condition, from 
an organization described in section 501(c)(3) of the Internal Revenue 
Code of 1986 which is exempt from taxation under section 501(a) of such 
Code. The resource exclusion applies to any in-kind gift that is not 
converted to cash, or to a cash gift that does not exceed $2,000; and
    (s) Funds received and conserved to pay for medical and/or social 
services as provided in Sec.  416.1103 of this chapter.

Adjustments and Terminations


Sec.  418.3501  What could cause us to increase or reduce your subsidy 
or terminate your subsidy eligibility?

    (a) Certain changes in your circumstances could cause us to 
increase or reduce your subsidy or terminate your subsidy eligibility. 
These changes include (but are not limited to) changes to:
    (1) Your income;
    (2) Your spouse's income if you are married and living with your 
spouse;
    (3) Your resources;
    (4) Your spouse's resources if you are married and living with your 
spouse; and
    (5) Your family size.
    (b) We will periodically review your circumstances (as described in 
Sec.  418.3125) to make sure you are still eligible for a subsidy and, 
if eligible, whether you should receive a full or partial subsidy.
    (c) If you report that your circumstances have changed or we 
receive other notice of such a change after we determine that you are 
eligible, we will review your circumstances as described in Sec.  
418.3120 to determine if you are still eligible.


Sec.  418.3505  How would an increase, reduction or termination affect 
you?

    (a) An increase in your subsidy means that you would be able to pay 
a lower premium to participate in the Medicare Part D prescription drug 
program. An increased subsidy may also result in a reduction in any 
deductible or copayments for which you are responsible.
    (b) A reduction in your subsidy means that you would have to begin 
to pay a premium or a higher premium to participate in the Medicare 
Part D prescription drug program. You may also have to begin to pay a 
deductible and higher copayments or increase the amounts of these 
payments.
    (c) A termination means that you would no longer be eligible for a 
subsidy under the Medicare Part D prescription drug program.


Sec.  418.3510  When would an increase, reduction or termination start?

    We are required to give you a written notice of our proposed action 
before increasing, reducing, or terminating your subsidy. We will not 
give this advance notice where we have factual information confirming 
your death, such as through a report by your surviving spouse, a legal 
guardian, a close relative, or a landlord. The notice will tell you the 
first month that we plan to make the change. The notice will also give 
you appeal rights which are explained in detail in Sec. Sec.  418.3601-
418.3670. Your appeal rights for a reduction or termination will 
include the right to continue to receive your subsidy at the previously 
established level until there is a decision on your appeal request. You 
will not be required to pay back any subsidy you received while your 
appeal was pending.


Sec.  418.3515  How could you qualify for a subsidy again?

    Unless you subsequently qualify as a deemed eligible person (per 42 
CFR 423.773(c)), you must file a new application for a subsidy and meet 
all the requirements in Sec.  418.3101.

Determinations and the Administrative Review Process


Sec.  418.3601  When do you have the right to administrative review?

    You have the right to an administrative review of the initial 
determination we make about your eligibility and about your continuing 
eligibility for a subsidy and any other matter that gives you the right 
to further review as discussed in Sec.  418.3605. If you are married 
and living with your spouse and your spouse's eligibility for a subsidy 
may be adversely affected by our decision upon review, we will notify 
your spouse before our review and give him or her the opportunity to 
present additional information for us to consider.


Sec.  418.3605  What is an initial determination?

    Initial determinations are the determinations we make that are 
subject to administrative and judicial review. The initial 
determination will state the relevant facts and will give the reasons 
for our conclusions. Examples of initial determinations that are 
subject to administrative and judicial review include but are not 
limited to:
    (a) The calculation of your income and/or resources;
    (b) The determination about whether or not you are eligible for a 
subsidy and if so, whether you receive a full or partial subsidy;
    (c) The determination to reduce your subsidy; and
    (d) The determination to terminate your subsidy.


Sec.  418.3610  Is there administrative or judicial review for 
administrative actions that are not initial determinations?

    Administrative actions that are not initial determinations may be 
reviewed by us, but they are not subject to the administrative or 
judicial review process as provided by these sections. For example, 
changes in your prescription drug program or voluntary disenrollment in 
the Part D program are not initial determinations that are subject to 
the administrative review process.


Sec.  418.3615  Will we mail you a notice of the initial determination?

    (a) We will mail a written notice of the initial determination to 
you at your

[[Page 10571]]

last known address. Generally, we will not send a notice if your 
premium subsidy stops because of your death or if the initial 
determination is a redetermination that your eligibility for a subsidy 
and the amount of your subsidy has not changed.
    (b) The written notice that we send will tell you:
    (1) What our initial determination is;
    (2) The reasons for our determination; and
    (3) The effect of our determination on your right to further 
review.
    (c) We will mail you a written notice before increasing, reducing, 
or terminating your subsidy. The notice will tell you the first month 
that we plan to make the change and give you appeal rights. Your appeal 
rights for a reduction or termination will include the right to 
continue to receive your subsidy at the previously established level 
until there is a decision on your appeal request.


Sec.  418.3620  What is the effect of an initial determination?

    An initial determination is binding unless you request an appeal 
within the time period stated in Sec.  418.3630(a).


Sec.  418.3625  What is the process for administrative review?

    The process for administrative review of initial determinations is 
either a hearing conducted by telephone or a case review. We will 
provide you with a hearing by telephone when you appeal the initial 
determination made on your claim, unless you choose not to participate 
in a telephone hearing. If you choose not to participate in a telephone 
hearing, the review will consist of a case review. The hearing will be 
conducted by an individual who was not involved in making the initial 
determination. The individual who conducts the hearing will make the 
final decision after the hearing. If you are dissatisfied after we have 
made a final decision, you may file an action in Federal district 
court.
    (a) Notice scheduling the telephone hearing. Once you request a 
telephone hearing, we will schedule the hearing and send you a notice 
of the date and time of the hearing at least 20 days before the 
hearing. The notice will contain a statement of the specific issues to 
be decided and tell you that you may designate a personal 
representative (as defined in 42 CFR 423.772) to represent you during 
the proceedings. The notice will explain the opportunity and procedure 
for reviewing your file and for submitting additional evidence prior to 
the hearing. It also will provide a brief explanation of the 
proceedings, of the right and process to subpoena witnesses and 
documents, of the procedures for requesting a change in the time or 
date of your hearing, and of the procedure for requesting interpreter 
services.
    (b) Opportunity to review your file. Prior to the telephone 
hearing, you will be able to review the information that was used to 
make an initial determination in your case. You can provide us with 
additional information you wish to have considered at the hearing.
    (c) Hearing Waived, Rescheduled, or Missed. If you decide you do 
not want a hearing by telephone or if you are not available at the time 
of the scheduled hearing, the decision in your case will be made by a 
case review. This means that the decision will be based on the 
information in your file and any additional information you provide. 
You may ask for a change in the time and date of the telephone hearing; 
this should be done at the earliest possible opportunity prior to the 
hearing. Your request must state your reason(s) for needing the change 
in time or date and state the new time and date you want the hearing to 
be held. We will change the time and date, but not necessarily to your 
preferred time or date, of the telephone hearing if you have good 
cause. If you miss the scheduled hearing and the decision in your case 
is decided by a case review, we will provide a hearing, at your written 
request, if we decide you had good cause for missing the scheduled 
hearing. Examples of good cause include, but are not limited to, the 
following:
    (1) You have attempted to obtain a representative but need 
additional time;
    (2) Your representative was appointed within 30 days of the 
scheduled hearing and needs additional time to prepare for the hearing;
    (3) Your representative has a prior commitment to be in court or at 
another administrative hearing on the date scheduled for your hearing;
    (4) A witness who will testify to facts material to your case would 
be unavailable to participate in the scheduled hearing and the evidence 
cannot be obtained any other way;
    (5) You are unrepresented, and you are unable to respond to the 
notice of hearing because of any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language) that you may have; or
    (6) You did not receive notice of the hearing appointment.
    (d) Witnesses at hearing. When we determine that it is reasonably 
necessary for the full presentation of a case, we may issue a subpoena 
to compel the production of certain evidence or testimony.


Sec.  418.3630  How do you request administrative review?

    (a) Time period for requesting review. You must request 
administrative review within 60 days after the date you receive notice 
of the initial determination (or within the extended time period if we 
extend the time as provided in paragraph (c) of this section). You can 
request administrative review in person, by phone, fax, or mail. If you 
miss the time frame for requesting administrative review, you may ask 
us for more time to request a review. The process for requesting an 
extension is explained further in paragraph (c) of this section.
    (b) Where to file your request. You can request administrative 
review by mailing or faxing a request or calling or visiting any Social 
Security office.
    (c) When we will extend the time period to request administrative 
review. If you want a review of the initial determination but do not 
request one within 60 days after the date you receive notice of the 
initial determination, you may ask us for more time to request a 
review. Your request for an extension must explain why it was not filed 
within the stated time period. If you show us that you had good cause 
for missing the deadline, we will extend the time period. To determine 
whether good cause exists, we use the standards explained in Sec.  
418.3640.


Sec.  418.3635  Can anyone request administrative review on your 
behalf?

    Your personal representative (as defined in 42 CFR 423.772) may 
request administrative review on your behalf. That person can send 
additional information to us on your behalf and participate in the 
hearing.


Sec.  418.3640  How do we determine if you had good cause for missing 
the deadline to request administrative review?

    (a) In determining whether you have shown that you have good cause 
for missing a deadline to request review we consider:
    (1) What circumstances kept you from making the request on time;
    (2) Whether our action misled you;
    (3) Whether you did not understand the requirements of the Act 
resulting from amendments to the Act, other legislation, or court 
decisions; and
    (4) Whether you had any physical, mental, educational, or 
linguistic limitations (including any lack of facility with the English 
language) which prevented you from filing a timely request or from 
understanding or knowing about the need to file a timely request for 
review.

[[Page 10572]]

    (b) Examples of circumstances where good cause may exist include, 
but are not limited to, the following situations:
    (1) You were seriously ill and were prevented from contacting us in 
person, in writing, or through a friend, relative, or other person.
    (2) There was a death or serious illness in your immediate family.
    (3) Important records were destroyed or damaged by fire or other 
accidental cause.
    (4) You were trying very hard to find necessary information to 
support your claim but did not find the information within the stated 
time periods.
    (5) You asked us for additional information explaining our action 
within the time limit, and within 60 days of receiving the explanation 
you requested a review.
    (6) We gave you incorrect or incomplete information about when and 
how to request administrative review.
    (7) You did not receive notice of the initial determination.
    (8) You sent the request to another Government agency in good faith 
within the time limit and the request did not reach us until after the 
time period had expired.
    (9) Unusual or unavoidable circumstances exist, including the 
circumstances described in paragraph (a)(4) of this section, which show 
that you could not have known the need to file timely, or which 
prevented you from filing timely.


Sec.  418.3645  Can you request that the decision-maker be 
disqualified?

    The person designated to conduct your hearing will not conduct the 
hearing if he or she is prejudiced or partial with respect to any party 
or has any interest in the matter pending for decision. If you object 
to the person who will be conducting your hearing, you must notify us 
at your earliest opportunity. The Commissioner or the Commissioner's 
designee will decide whether to appoint another person to conduct your 
hearing.


Sec.  418.3650  How do we make our decision upon review?

    After you request review of our initial determination, we will 
review the information that we considered in making the initial 
determination and any other information we receive. We will make our 
decision based on this information. The issues that we will review are 
the issues with which you disagree. We may consider other issues, but 
we will provide you with advance notice of these other issues as 
explained in Sec.  418.3625. If you are dissatisfied with our final 
decision, you may file an action in Federal district court.


Sec.  418.3655  How will we notify you of our decision after our 
review?

    We will mail a written notice of our decision on the issue(s) you 
appealed to you at your last known address. Generally, we will not send 
a notice if your subsidy stops because of your death. The written 
notice that we send will tell you:
    (a) What our decision is;
    (b) The reasons for our decision;
    (c) The effect of our decision; and
    (d) Your right to judicial review of the decision.


Sec.  418.3665  Can your request for a hearing or case review be 
dismissed?

    We will dismiss your request for a hearing or case review under any 
of the following conditions:
    (a) At any time before notice of the decision is mailed, you ask 
that your request for administrative review be withdrawn; or
    (b) You failed to request administrative review timely and did not 
have good cause for missing the deadline for requesting review.


Sec.  418.3670  How will you be notified of the dismissal?

    We will mail a written notice of the dismissal of your request for 
administrative review to you at your last known address. The dismissal 
is not subject to judicial review and is binding on you unless we 
vacate it. The decision-maker may vacate any dismissal of your request 
for administrative review if, within 60 days after the date you receive 
the dismissal notice, you request that the dismissal be vacated and 
show good cause why the request should not be dismissed. The decision-
maker shall advise you in writing of any action he or she takes.


Sec.  418.3675  How does our decision affect you?

    Our decision is binding unless you file an action in Federal 
district court seeking review of our final decision. You may file an 
action in Federal district court within 60 days after the date you 
receive notice of the decision. You may request that the time for 
filing an action in Federal district court be extended. The request 
must be in writing and it must give the reasons why the action was not 
filed within the stated time period. The request must be filed with the 
decision-maker who issued the final decision in your case. If you show 
that you had good cause for missing the deadline, we will extend the 
deadline. We will use the standards in Sec.  418.3640 to decide if you 
had good cause to miss the deadline.


Sec.  418.3680  What happens if your case is remanded by a Federal 
court?

    When a Federal court remands a case to the Commissioner for further 
consideration, the decision-maker (as described in Sec.  418.3670) 
acting on behalf of the Commissioner, may make a decision. That 
component will follow the procedures in Sec.  418.3625, unless we 
decide that we can make a decision that is wholly favorable to you 
without another hearing. Any issues relating to your subsidy may be 
considered by the decision-maker whether or not they were raised in the 
administrative proceedings leading to the final decision in your case.

[FR Doc. 05-4097 Filed 3-3-05; 8:45 am]
BILLING CODE 4191-02-P