[Federal Register Volume 70, Number 250 (Friday, December 30, 2005)]
[Rules and Regulations]
[Pages 77664-77685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-24633]



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Part V





Social Security Administration





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20 CFR Part 418



Medicare Part D Subsidies; Final Rule

  Federal Register / Vol. 70, No. 250 / Friday, December 30, 2005 / 
Rules and Regulations  

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SOCIAL SECURITY ADMINISTRATION

20 CFR Part 418

RIN 0960-AG03


Medicare Part D Subsidies

AGENCY: Social Security Administration (SSA).

ACTION: Final rules.

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SUMMARY: We are adding to our regulations a new part to contain rules 
that we will apply when we evaluate applications for premium and cost-
sharing subsidies under the Medicare program. We are including a new 
subpart, Medicare Part D Subsidies, to this part. This new subpart 
contains 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 or MMA). These final rules 
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: These final rules are effective on December 30, 2005.

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 Federal Register 
document. 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:

Electronic Version

    The electronic file of this document is available on the date of 
publication in the Federal Register at http://www.gpoaccess.gov/fr/index.html.

Statutory Provisions

    Section 101 of the Medicare Modernization Act (Pub. L. 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 final 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 are not 
authorized to 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. Additionally, CMS will conduct annual 
redeterminations of deemed status and will reconsider certain CMS low 
income subsidy (LIS) determinations; CMS LIS reconsideration procedures 
will be addressed in the agency's operating instructions.) Generally, 
the agency that processes the subsidy application will handle 
redeterminations and appeals related to that initial eligibility 
determination.

Background

    The purpose of the subsidy program is to assist some Medicare 
beneficiaries who have limited financial means with paying for 
voluntary Medicare prescription drug coverage under the Medicare Part D 
program. If you have limited income and 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 us 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., a prescription 
drug plan. (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. 
Sections 423.32-423.34 of 42 CFR discuss the enrollment process, 
including the enrollment of full benefit dual-eligible individuals. You 
also may obtain information about enrolling on the Internet at 
www.medicare.gov or by calling CMS at 1-800-Medicare.)
    You may take these 2 steps in any order. However, if you have 
Medicare and receive Medicaid coverage, are enrolled in a Medicare 
Savings Program within your State, or receive Supplemental Security 
Income (SSI), you will be deemed eligible for the subsidy effective 
with the first month you meet any one of these conditions; and you do 
not need to file a subsidy application.
    Certain individuals with both Medicare and Medicaid, with Medicare 
Savings Programs, or with Medicare and receiving SSI payments but who 
have not enrolled in a prescription drug plan, will be able to take 
advantage of special enrollment processes. The special enrollment 
processes are discussed in the preamble to CMS' final rules published 
January 28, 2005 at 70 FR 4205-4209 and in CMS's regulations at 42 CFR 
423.34.

How To Become Eligible for a Subsidy

    Section 1860D-14 of the Act requires us to take applications for 
subsidies from individuals who are applying for Medicare Part D 
prescription drug coverage. These final 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 Insurance) and/or enrolled in Medicare Part B (Supplementary 
Medical Insurance) under title XVIII of the Act;

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     You must be enrolled in a Medicare prescription drug plan 
or Medicare Advantage plan with prescription drug coverage by the end 
of your enrollment period;
     You must reside in the United States as defined in Sec.  
418.3010;
     You (and your living with 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 or you are no longer enrolled with a 
Medicare prescription drug plan or Medicare Advantage plan with 
prescription drug coverage.
    These final 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) of the Act specifies that initial 
subsidy determinations will remain in effect for a period to be 
determined by the Secretary of Health and Human Services (HHS) 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 
determination that you are eligible for a subsidy.
    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 final rules contain an exception to the 
general rule 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, resumption of members of a couple 
living together, 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 or we receive such a report from another source, 
we will send you a redetermination form. You must complete the form and 
return it to us so that we can redetermine your subsidy. The 
redetermined subsidy, if any, will be effective with the month after 
the month you request us to redetermine your subsidy. We will process 
other changes, such as the loss of a job, which you would report, in 
conjunction with your next redetermination.

Eligibility and Applying for a Subsidy

    Attaining eligibility 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 receive the subsidy is the month you are 
enrolled in such a plan.
    These final rules apply when you file for a Medicare Part D subsidy 
with us. 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 us or a State 
office that accepts Medicaid applications. Our application may be 
printed in paper form, completed by our employees on computer screens, 
or available on our Internet Web site, Social Security Online at http://www.socialsecurity.gov.
    When you file an application we will determine your eligibility and 
provide you with appeal rights. If we find that you are eligible for 
the subsidy, we will also determine 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 
our Internet Web site, we will use the date of your inquiry or the date 
we receive a partially completed Internet subsidy application from our 
Web site as your filing date for the subsidy if the requirements in 
Sec.  418.3230 are met.
    Your application for the subsidy remains in effect until we make a 
final determination on it. As stated in Sec.  418.3620, our initial 
determination is binding unless you request an appeal within the time 
period stated in Sec.  418.3630(a) and our decision on the appeal is 
binding unless you file an action in Federal district court seeking 
review of our final decision (see Sec.  418.3675). If you timely file 
an appeal of our initial determination, your application for the 
subsidy remains in effect until we make a decision on your appeal. 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.

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 will 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 final 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 income. In addition, we will exclude from 
unearned income the first $60 per calendar quarter of income that is 
irregular or infrequent; e.g., cash received as a birthday gift, and 
the first $30 per calendar quarter of earned income that is irregular 
or infrequent.

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We will also exclude all interest and dividends.
    We will exclude up to $65 per month ($780 per year) and one-half of 
the 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 under Social Security rules 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 under Social 
Security rules 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 with 
disability related or blind work expenses 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 will 
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 final rules explain 
what resources we will count and what resources we will not count; 
i.e., exclude from counting. As directed by the legislation, the 
resource exclusions are modeled after the resource exclusions in the 
SSI program.
    We will count liquid resources, which are cash, financial accounts, 
financial instruments, and other property that 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, revocable trusts, 
and funds in an irrevocable trust if the individual can direct the use 
of those funds. We will presume that these types of resources can be 
converted to cash within 20 workdays and are countable. However, if the 
individual establishes that a particular resource cannot be converted 
to cash within 20 workdays, we will not count it as a resource in the 
subsidy determination. We also will count the equity value of real 
property that you own except for the home that is your principal place 
of residence and the land it resides on. We will not count other 
nonliquid resources such as motor vehicles and irrevocable trusts.

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 redetermine 
your continuing subsidy eligibility periodically. 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 final rules explain how we will make adjustments to or terminate 
subsidies as a result of periodic redeterminations or redeterminations 
based on reports of death, marriage, divorce, annulment, separation, or 
resumption of living together. 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 appeal procedure for the SSI program. The procedures in 
these final rules will apply only if we, not a State Medicaid agency, 
make the initial determination. If CMS determines that you no longer 
meet deemed status because you are no longer eligible for SSI (and CMS 
determines you are not eligible for Medicaid or the Medicare Savings 
Program), CMS may refer you to us about your SSI eligibility.
    We have 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 to your 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 final 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 will provide you one level of 
administrative review. Under these final 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. We will work with your representative 
just as we would work with 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.
    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 an 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, we will 
send you a written notice explaining our decision. If you are 
dissatisfied with our final decision, you may file an action in Federal 
district court. As we explain in Sec.  418.3670, if we dismiss your 
appeal, we will mail a written notice of the dismissal to you, but the 
dismissal is not subject to judicial review and is binding on you 
unless we vacate it.

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    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.
    We may correct clerical errors if discovered within 60 days of the 
date of our initial determination. We will notify you of our revised 
determination as explained in Sec.  418.3678.

Explanation of Part 418

    Part 418 consists of four subparts. We are reserving subparts A-C 
for future use. We are adding a new subpart D, Medicare Part D 
Subsidies, which contains the rules that we use to make determinations 
and decisions about eligibility for the subsidy.
    Following is a description of each section for subpart D.

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.

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     Section 418.3620 explains that an initial determination is 
binding unless you request an appeal within the stated time period or 
we revise it as explained in Sec.  418.3678.
     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.
     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 or we revise it as explained in Sec.  418.3678.
     Section 418.3678 explains the process for correcting 
Agency clerical errors.
     Section 418.3680 explains what happens if a Federal court 
remands your case to us.

Public Comments

    On March 4, 2005, we published proposed rules in the Federal 
Register at 70 FR 10558 and provided a 60-day period for interested 
persons to comment. We received comments from 22 organizations and one 
individual. Because some of the comments received were quite detailed, 
we have condensed, summarized or paraphrased them in the following 
discussion. We have tried to present all views adequately and carefully 
address all of the issues raised by the commenters that are within the 
scope of the proposed rules.

Introduction, General Provisions and Definitions

    Comment: One commenter recommended that we revise the proposed 
rules to provide guidance to States on how to verify income and 
resources, and how to process redeterminations and appeals.
    Response: As noted in the preamble to the proposed rules, these 
rules only address our processing of applications, redeterminations and 
appeals. We have no authority to regulate the States in this area. CMS 
oversees the State's participation in this program and issued its own 
rules that the States are expected to follow on January 28, 2005 (70 FR 
4193). CMS also issued additional guidance to the States in a document 
dated May 25, 2005. This guidance is available on CMS' Web site at 
http://www.cms.hhs.gov/States/03_lowincomesubsidy.asp.
    Comment: Six commenters suggested that the final rules include time 
limits within which we must process applications, redeterminations, and 
appeals.
    Response: We have designed a largely automated process to ensure 
timely processing of applications, redeterminations and appeals. We 
intend to complete all actions as quickly as possible. We expect that 
most applications and redeterminations will be processed expeditiously. 
However, there are several aspects of the process that make it 
impossible to guarantee a specific processing time. For example, if 
information reported on the application conflicts with information 
obtained from other Federal agencies regarding an applicant's income or 
resources, we will need to contact the applicant to reconcile the 
discrepancy, which might increase the time needed to process the 
application. We also expect to receive some applications that have not 
been fully completed that will require additional time to complete 
before processing. Furthermore, because this is a new program, it is 
difficult to anticipate the volumes of applications, redeterminations, 
or appeals that we will receive. The volume of receipts could impact 
the processing time and make it inappropriate to set specific time 
limits for acting on an appeal. Lastly, the legislation imposes no such 
time limits, and we do not believe it advisable for us to do so.
    In evaluating this comment and reviewing the relevant proposed 
rules, we detected an inadvertent error in Sec.  418.3225(c). That 
section stated that individuals who applied for the subsidy but were 
not yet entitled to Medicare Part A or enrolled in Medicare Part B 
would receive a letter explaining their eligibility for the subsidy 
provided they become so entitled and/or enrolled. However, because 
entitlement to Medicare Part A or enrollment in Medicare Part B is a 
criterion for eligibility for a subsidy (in addition to enrollment in a 
Part D plan), we will not be able to make a subsidy eligibility 
determination in the absence of entitlement to or enrollment in 
Medicare Part A or Part B. (The CMS regulations at 42 CFR 423.774 
permit a subsidy eligibility determination to be made for Medicare 
beneficiaries not yet enrolled in a prescription drug plan, but they do 
not provide similar authority regarding individuals who do not yet have 
Medicare coverage.) Therefore, we are revising Sec.  418.3225(c) to 
state that if you apply for the subsidy before you are entitled to 
Medicare Part A and/or enrolled in Medicare Part B but you appear to be 
in an enrollment period, the notice we send will advise you that we 
will not take any action on your application until you become entitled 
to Medicare Part A and/or enrolled in Medicare Part B. If you do not 
appear to be in an enrollment period, the notice will advise you that 
you are not eligible for the subsidy because you are not entitled to 
Medicare Part A or enrolled in Medicare Part B. This letter will also 
explain your appeal rights.
    Comment: One commenter stated that the Notice of Termination should 
be sent 30 days prior to the termination date.
    Response: The MMA instructed us to establish a simplified program. 
In keeping with the directive, we are following notice guidelines used 
in other programs that we administer. As a result, the Notice of 
Termination explains that the beneficiary will receive continuation of 
their subsidy if he or she appeals within 10 days, and further explains 
that the beneficiary has 60 days to appeal. Additionally, the 
beneficiary can request good cause for late filing of an appeal if he/
she fails to meet the 10 and 60-day deadlines.
    Comment: One commenter suggested that the regulations should 
include a provision requiring us to issue all notices in alternate 
language formats upon claimant request.
    Response: Although this is a valid concern that warrants further 
consideration, we have not adopted this comment. The only alternate 
language format for notices we are currently able to offer is Spanish; 
however, this is not available to Railroad Retirement beneficiaries 
because we do not have a record of their preference for a Spanish 
notice. We will investigate expanding

[[Page 77669]]

our ability to offer other alternate language formats in the future.
    Comment: One commenter stated that we should hire enough staff to 
handle the new workload.
    Response: This comment is not within the scope of these rules. 
However, we have put a great deal of effort into determining the amount 
of staff that will be needed, as well as the hiring and training of the 
additional staff.

Eligibility for a Medicare Prescription Drug Subsidy

    Comment: Nine commenters said that the rules should state that the 
low-income subsidy shall not negatively affect the eligibility of any 
recipient for other Federal benefits programs.
    Response: Since the Act does not address the effect of the subsidy 
on other Federal programs or provide a specific exclusion, and since we 
have no authority to instruct other agencies, this recommendation is 
beyond the scope of these rules. However, CMS has prepared several fact 
sheets explaining the impact of the subsidy on various Federal 
programs. Those fact sheets are available at CMS' Web site, 
www.Medicare.gov. In evaluating this comment, we noticed that our 
proposed rules were not sufficiently clear about how income excluded by 
other Federal programs would be treated for purposes of determining 
eligibility for the subsidy. Therefore, we are revising Sec.  
418.3350(b), by adding a reference to Sec.  416.1124(b) of our rules to 
clarify that income, excluded by the SSI program because it is excluded 
under other Federal statutes, will also be excluded for purposes of 
determining eligibility for the subsidy.
    Comment: Nine commenters suggested that we add explicit language to 
explain when eligibility is effective for beneficiaries with deemed 
eligibility status.
    Response: We agree with this comment and have revised Sec.  
418.3105 to clarify that if beneficiaries have deemed eligibility 
status because they receive Medicaid coverage, are enrolled in a 
Medicare Savings Program within their State, or receive SSI and have 
Medicare, then their subsidy is effective with the first month they 
have deemed eligibility status.
    Comment: Nine commenters said that the rules should include a 
procedure to screen applicants for eligibility for Medicare Savings 
Programs.
    Response: We believe that this is a procedural matter that does not 
require us to revise our rules. However, our operating guides include 
instructions on screening for these cases.
    Comment: Nine commenters said that we should adopt a policy of 
continuous eligibility where beneficiaries retain eligibility for a 
full 12 months, regardless of any income changes.
    Response: Following the guidelines in CMS regulations at 42 CFR 
423.780, we will determine eligibility and subsidy percentage for a 
calendar year. CMS will make the subsidy amount determination. These 
determinations will remain in effect throughout the year, unless a 
beneficiary reports a subsidy-changing event described in Sec.  
418.3120(a) or the beneficiary becomes deemed eligible for a full 
subsidy.
    Comment: Two commenters said that we should use data exchange 
information to determine if beneficiaries qualify for a more generous 
subsidy.
    Response: The rules state at Sec.  418.3120(b)(1) that we will use 
information we receive from the beneficiary or from data exchanges with 
Federal agencies to determine the correct subsidy amount. Depending on 
the new information we receive, the subsidy may increase, decrease, or 
remain unchanged. Except as provided in Sec.  418.3120(a), we will use 
any income or resource information obtained via data exchange when we 
determine a person's continuing eligibility for the next calendar year.
    Comment: One commenter said that we should specify a time frame for 
enrollment in a Medicare Advantage plan.
    Response: Medicare Advantage plans and enrollment rules fall under 
the jurisdiction of HHS and CMS. Therefore, we do not have the 
authority to implement rules governing Medicare Advantage plans.
    Comment: One commenter said that we should develop processes to 
advise applicants whose application for the subsidy has been denied 
that they might qualify for Medicaid or a Medicare Savings Program.
    Response: We are aware of the importance of making referrals to 
other programs. Our notices will advise all applicants of their 
potential eligibility for a Medicare Savings Program.
    Comment: One commenter said that late enrollment penalties should 
not be assessed for individuals who have their applications denied when 
they are not enrolled in a plan but later have their claims allowed.
    Response: The policies for late enrollment penalties are under the 
control of CMS. Therefore, we are not authorized to implement policies 
governing late enrollment penalties.
    Comment: Three commenters asked that we provide greater detail in 
the regulations about how we will conduct redeterminations of subsidy 
eligibility. They suggested that we adopt a ``passive'' redetermination 
process, in which we advise the beneficiary about the information we 
have, and the beneficiary is only required to respond if the 
information is inaccurate. They suggested that we limit the number of 
times we will conduct a redetermination in a given period. The 
commenters explain that this would enable a simple redetermination 
process that would not be a burden on us or on beneficiaries.
    Response: We agree that the redetermination process should be 
simple and should not be burdensome. For these reasons, we plan to use 
a ``passive'' redetermination process for a beneficiary's first 
scheduled redetermination. Further, we do not plan to conduct a 
redetermination for every beneficiary every year, but will instead 
schedule redeterminations based on the likelihood that an individual's 
situation may change. We expect this process to fulfill our 
responsibility to maintain the integrity and accuracy of the subsidy 
program, while minimizing burdens placed on us and on beneficiaries. 
However, without further experience we cannot commit ourselves to the 
``passive'' redetermination process or any particular redetermination 
frequency, and therefore we are not revising the regulation to address 
these issues. Experience may tell us that a different process better 
serves the integrity of the program and interests of beneficiaries. The 
law gives us broad discretion, which we exercise in these regulations, 
to determine the procedures for conducting redeterminations. However, 
based on these comments, we are changing Sec.  418.3110(c) and Sec.  
418.3225(b) to eliminate the statement that we will terminate subsidy 
eligibility if an individual has not yet enrolled in a prescription 
drug plan at the time of a redetermination. We are making this change 
because some situations could develop in the future where an individual 
will be enrolled in a drug plan but the effective date will be later 
than our redetermination. We plan to monitor our redetermination 
process in order to determine whether any further changes are 
warranted.
    Comment: Four commenters suggest that changes that would affect the 
subsidy amount, such as in income, resources, household composition, or 
enrollment in a Medicare Savings Program, could be reported at any time 
and should become effective immediately, or a month after the month of 
the report of the change, rather than delaying the effect. They are 
concerned about the fact that these changes are not

[[Page 77670]]

effective until the January following the report. They believe this 
would be disadvantageous for beneficiaries who have a decrease in 
income or resources, but will continue to receive the same subsidy 
amount until a redetermination is completed.
    Response: Section 418.3110(d)(3) of these final rules clarify that 
a person who has been denied eligibility for a prescription drug 
subsidy may reapply any time their situation changes. Individuals 
already receiving a subsidy may report significant changes at any time. 
However, in keeping with the direction provided by section 1860D-14 of 
the Act, we established a simplified application form and process for 
this program. One technique that we adopted to maintain a simplified 
process was that eligibility determinations will be based on 
determinations of yearly income and resource amounts. The determination 
remains in effect for a calendar year unless the beneficiary reports 
one of the six subsidy changing events listed in the rules, appeals the 
initial determination, or becomes eligible for a program that would 
cause deemed eligibility for a full subsidy. This approach ensures that 
the individuals found eligible for subsidies will have continuous 
eligibility and will not be impacted by monthly income changes. Also, 
beneficiaries are not burdened with reporting responsibilities. This 
comment did alert us to one possible subsidy-changing event that we 
inadvertently omitted, that of a change in household composition due to 
a separated married couple resuming living together. We have revised 
Sec.  418.3120 to reflect this change.

Filing of Application

    Comment: One commenter said that we should use a term such as 
``helper'' as synonymous with ``representative'' and specify that 
representatives are always allowed to sign an application.
    Response: We follow CMS' policy concerning representatives in the 
Medicare program as defined by CMS' regulations at 42 CFR 423.772. This 
definition makes it clear, however, that representatives are fully 
authorized to act on a person's behalf.
    Comment: One commenter suggested that we eliminate the penalty 
clause on the application. Another commenter said that the form should 
not have been drafted prior to the issuance of these rules and that it 
should be revised to consider any comments received on these rules.
    Response: We published three notices in the Federal Register on 
July 30, 2004 (69 FR 45879), September 30, 2004 (69 FR 58578) and 
November 17, 2004 (69 FR 67379). In these notices, we gave the public 
an opportunity to comment on the application form. We received a number 
of comments on the form which we evaluated before the final version was 
approved. None of the comments received on these rules will impact the 
application. However, we will continue to evaluate and revise the form 
when changes appear necessary.
    Comment: Ten commenters made the following comments about various 
aspects of the application process:
     Allow more time to submit requested information, so that 
applicants who may be mentally or physically unable to comply will have 
an adequate opportunity to respond.
     Clarify how we will assist when an applicant fails to 
submit requested information.
     Contact the applicant and explain what is needed to 
complete the application.
     Give the applicant 180 days to complete the application.
     Specify a time frame to process incomplete applications 
and clarify the rules we will follow to process them.
     State that we will send a written notice giving a deadline 
to submit the required information.
    Response: These comments deal with procedural issues and are not 
within the scope of these rules. However, we have reviewed the 
operating instructions and believe they address the concerns raised by 
the commenters. We will continue to monitor the process and make 
changes if necessary.

Income

    Comment: Five commenters recommended that we revise Sec.  418.3335 
to remove in-kind support and maintenance from consideration as 
countable income. They asserted that under MMA, we have the authority 
to exclude consideration of in-kind support and maintenance in making 
eligibility determinations. Four of the five commenters pointed out 
that the Medicare Savings Program uses SSI methodology to determine 
countable income but the model Medicare Savings Program application 
created by CMS does not include in-kind support and maintenance. They 
further pointed out that it could be difficult for individuals to 
provide information about household expenses which might discourage 
potential beneficiaries from filing a claim.
    Response: After careful consideration, we decided not to adopt this 
recommended change. Section 1860D-14(a)(3)(C)(i) of the Act provides 
that income for subsidy eligibility shall be determined in the manner 
prescribed in section 1905(p)(1)(B) of the Act without regard to the 
application of section 1902(r)(2). Section 1905(p)(1)(B) of the Act 
provides that income will be determined under section 1612 of the Act. 
Section 1902(r)(2) provides the authority for States to use income and 
resources methodologies for certain groups of Medicaid eligibles that 
are less strict than those used in the SSI program, but section 1860D-
14(a)(3)(C)(i) specifically precludes us from using those less strict 
rules. Therefore, we must follow the income-counting requirements of 
section 1612 which provides that in-kind support and maintenance will 
be counted as income with a maximum value of one-third of the 
applicable SSI Federal benefit rate, although we have simplified some 
of the rules consistent with Congress' intent.
    Comment: One commenter recommended that we simplify the in-kind 
support and maintenance determination described in Sec.  418.3345 by 
allowing beneficiaries to use a default dollar value equal to one-third 
of the SSI Federal benefit rate unless the beneficiary alleges a dollar 
amount less than the default value.
    Response: We do not agree that permitting beneficiaries to use a 
default dollar value equal to one-third of the SSI Federal benefit rate 
would simplify in-kind support and maintenance determinations. In 
addition, we are concerned that offering individuals the option of 
using a default amount could inappropriately encourage individuals to 
allege the default amount instead of the actual amount which could be 
lower and, therefore, beneficial to the individual. Section 418.3345(b) 
of the final rules states that we will count in-kind support and 
maintenance as income only up to one-third of the applicable SSI 
Federal benefit rate. Section 418.3345(a) of the final rules states 
that the amount of income derived from in-kind support and maintenance 
is the current market value of the food and shelter provided by other 
people. When the current market value of the in-kind support and 
maintenance is less than one-third of the applicable Federal benefit 
rate, only the current market value is counted as income. However, to 
make this clear in the regulations, we have revised Sec.  418.3345(b) 
to state that if the current market value of in-kind support and 
maintenance the individual receives is worth less than one-third of the 
applicable monthly SSI Federal benefit rate, we count only the current 
market value as income.

[[Page 77671]]

    Comment: One commenter stated that the rules in Sec.  418.3345 do 
not offer a streamlined approach that enables beneficiaries to 
determine how much, if any, in-kind support and maintenance they 
receive. The commenter recommended that we reduce the amount of the 
maximum countable in-kind support and maintenance to below one-third of 
the Federal SSI benefit rate. The commenter further recommended that we 
provide a streamlined methodology for beneficiaries to calculate in-
kind support and maintenance.
    Response: After careful consideration, we decided not to adopt 
these recommended changes. The authority to count in-kind support and 
maintenance as income is derived from section 1612(a) of the Act. This 
section provides that the countable income derived from in-kind support 
and maintenance is equal to one-third of the Federal SSI benefit rate. 
The statute does not provide the authority to establish a lower maximum 
countable amount. We will count less than the maximum amount as income 
when the beneficiary receives in-kind support and maintenance that is 
worth less than the maximum. Furthermore, we are providing a 
streamlined process for determining in-kind support and maintenance 
which requires that the beneficiary answer only one question on the 
subsidy application. By limiting the application to only one question, 
we have developed a process that is very streamlined, and is much 
simpler than the SSI process for determining in-kind support and 
maintenance.
    Comment: Nine commenters stated that the Student Earned Income 
Exclusion (SEIE) should be applied to individuals who apply for the 
subsidy. In the SSI program, the SEIE applies to individuals under age 
22 who are regularly attending school and who have earned income. The 
SEIE excludes earned income up to a maximum of $5670 (in 2005) per 
year. The commenters state that this exclusion would permit disabled 
students to gain work experience without jeopardizing eligibility for 
the subsidy.
    Response: We expect that prescription drug subsidy claims involving 
individuals who could meet all of the requirements for the student 
earned income exclusion will be very rare. We are still analyzing the 
potential impact of the prescription drug subsidy on the disabled 
student population who have Medicare coverage and will revisit this 
area in subsequent regulations if appropriate.
    Comment: Nine commenters stated that the rules in Sec.  418.3325 
should provide an exclusion for earned income received by a Social 
Security Disability Insurance (SSDI) beneficiary during a trial work 
period or an unsuccessful work attempt. The same commenters stated that 
the regulation also should provide an exclusion for earned income of an 
SSDI beneficiary received as a result of a work-related subsidy or 
special condition. Under SSDI rules, a work-related subsidy exclusion 
is applied when an individual's earnings exceed the reasonable value of 
the work performed, and we count only the pay that is actually earned. 
Under SSDI rules, if work is done under special conditions, we may 
determine that the work does not show that the individual can perform 
substantial gainful activity. These commenters also stated that the 
regulations should permit SSDI beneficiaries to deduct unincurred 
business expenses when determining countable self employment income. An 
unincurred business expense occurs when a sponsoring agency or another 
person pays certain business expenses for the individual who is 
attempting to work. The commenters stated that not providing these 
earned income exclusions would be a disincentive for SSDI beneficiaries 
who might not try working because their earnings could cause them to 
lose eligibility for the subsidy.
    Response: After careful consideration, we decided not to adopt 
these recommended changes. The earned income exclusions proposed by the 
commenters pertain only to the SSDI program under title II of the Act. 
For purposes of determining subsidy eligibility, section 1860D-
14(a)(3)(C) of the Act provides that income is determined in the manner 
described in section 1905(p)(1)(B) of the Act; that is, under the SSI 
methodology provided in section 1612 of the Act. Section 1612 describes 
what income is countable and what income is excludable and does not 
provide for these earned income exclusions.
    Comment: Fourteen commenters stated that the rules in Sec.  
418.3325(b)(5) and (b)(7) should provide that impairment related work 
expenses (IRWE) and blind work expenses (BWE) should exclude the 
average percentage of gross earnings or the actual expenses, whichever 
is greater.
    Response: The rules in Sec.  418.3325(b)(5) and (b)(7) already 
provide that actual expenses for IRWE and BWE will be used if they are 
greater than the average percentage of such expenses. If the actual 
expenses are not greater, then the average percentage will be excluded 
automatically when the individual indicates on the application that he 
or she has such expenses.
    Comment: One commenter stated that if greater than average IRWEs 
and BWEs are not automatically considered, a clear procedure and 
timeline for establishing greater than average IRWEs and BWEs must be 
established so that beneficiaries are aware that their actual expenses 
will be considered if higher than the average expenses. The commenter 
further stated that the rules lack procedural availability or timelines 
within which SSA must respond to requests to consider actual expenses.
    Response: The specific procedures and timeline for determining 
higher than average IRWE and BWE expenses will not be addressed in the 
regulations. These are operational issues and not appropriate to 
include in regulations. However, Sec.  418.3325 clearly states that we 
will exclude greater than average IRWE or BWE expenses when the 
individual's actual IRWE or BWE expenses are greater than the average. 
The notices that we send to beneficiaries will state how much income we 
are counting and how much income is excluded because of IRWE or BWE. 
The notices will inform the beneficiaries to contact us if they 
disagree with our income determination. If a beneficiary contacts us 
with a question about the IRWE or BWE exclusion amount, we will help 
the individual to establish the actual amount of IRWE or BWE expenses 
that should be excluded.
    Comment: Four commenters who approved of our decision to use the 
average percentage for computing IRWE encouraged us to make the process 
of proving higher than average IRWE as easy for beneficiaries as 
possible. One of these four commenters recommended that we permit self-
attestation of higher IRWE to make the process simpler for 
beneficiaries and for us.
    Response: We agree with the commenter that the process for proving 
higher than average IRWE and BWE should be as easy as possible for 
beneficiaries. However, we do not believe a change in the regulation is 
necessary. The procedures we have developed are based on the 
recognition that determining dollar amounts for IRWE or BWE can be 
difficult because of the wide variety of expenses that potentially 
qualify for this exclusion. Therefore, under our procedures our staff 
will assist beneficiaries establish a higher than average IRWE or BWE 
exclusion and in obtaining any documentation that might be required to 
establish a higher than average IRWE or BWE exclusion. We will issue 
operating

[[Page 77672]]

instructions explaining these procedures.
    Comment: One commenter recommended that income deductions should be 
afforded to individuals who use service dogs or guide dogs and incur 
expenses related to use of these dogs.
    Response: The procedures for determining the exclusion of expenses 
associated with service dogs or guide dogs are provided in our 
operating instructions and will not be addressed in these regulations. 
Our procedures exclude expenses associated with service dogs and guide 
dogs and all associated expenses under either the IRWE or BWE exclusion 
if the dogs are needed for employment-related activity. To make it 
clear that BWE exclusions such as guide dogs also apply to subsidy 
determinations, we are adding a cross-reference in Sec.  418.3325(b)(7) 
that refers to the SSI BWE provision in Sec.  416.1112(c)(8) of our 
rules.
    Comment: One commenter recommended that we clarify the regulations 
by stating that cost-of-living increases in Federal benefits are not 
counted as income until the month following the annual publication of 
the updated Federal poverty guidelines.
    Response: We have clarified Sec.  418.3340(f) of the final rules to 
state that we will not count the amount of the cost-of-living 
adjustment (COLA) for Social Security benefits for any month before the 
Federal poverty guidelines are published. Section 1905(p)(2)(D)(i) of 
the Act provides that the income of an individual who is entitled to 
monthly insurance benefits under title II shall not include any amounts 
attributable to a COLA for each month through the month following the 
month in which the annual revision of the Federal poverty guidelines 
are published. However, the statutory authority to not count the COLA 
applies only to monthly insurance benefits under title II and not to 
other Federal benefits. Therefore, we have also revised Sec.  
418.3120(a)(7) for consistency.

Resources

    Comment: One commenter stated that our description in Sec.  
418.3405 of liquid resources as those which can be converted to cash 
within 20 workdays is ambiguous. The commenter stated that Sec.  
418.3405 of the rules should include a finite list of the resources 
that will be counted and a statement that anything not listed will not 
be counted.
    Response: The purpose of Sec.  418.3405 is to describe the types of 
financial accounts and instruments that will be counted as resources. 
Liquid resources are resources that are held in financial accounts or 
other instruments that can be converted to cash within 20 workdays. We 
will presume that these types of resources can be converted to cash 
within 20 workdays and are countable. However, if the individual 
establishes that a particular resource (other than nonhome real 
property) cannot be converted to cash within 20 workdays, we will not 
count it as a resource in the subsidy determination. We refer to 
``liquid resources'' in order to differentiate them from ``non-liquid'' 
resources which, except for equity in nonhome real property, will not 
be counted for purposes of determining subsidy eligibility (e.g., 
vehicles, household goods, jewelry, musical instruments, etc.). We are 
adding language to Sec.  418.3405 to clarify that ``20 days'' means 
``20 workdays.'' This is how we described this rule in the preamble of 
the Notice of Proposed Rulemaking (NPRM) and it was an unintended 
omission that we did not say ``workdays'' in Sec.  418.3405 in the 
NPRM.
    Based on over 30 years of experience making resource determinations 
for the SSI program, we are convinced that it is not feasible for us, 
or beneficial to the individual, to provide a finite list of all 
countable resources. A list could be developed to include most of the 
common types of financial instruments, but it would not capture all of 
the many types of financial instruments in existence now. In addition, 
new types of financial instruments and investment vehicles are being 
created regularly and often are given names in order to differentiate 
them from existing products. It would be very difficult to maintain 
such a list in our regulations. Using a list could also result in 
unequal treatment of beneficiaries because we would exclude from 
resource counting some financial products just because they are not on 
the list even if they are very similar to financial products on the 
list that are countable.
    To further improve the clarity of what resources are generally 
considered liquid, we will add the following examples to the list of 
resources that are ordinarily considered liquid, ``trusts if they are 
revocable or if the trust beneficiary can direct the use of the funds 
in the trust.'' We consider a revocable trust to be a liquid resource 
because it can be converted to cash. Also, if a trust beneficiary can 
direct the use of the funds in a trust, the funds in the trust are a 
liquid resource because the beneficiary can use those funds for support 
and maintenance.
    Comment: Two commenters recommended that the cash value of life 
insurance should not count as a resource because life insurance 
policies may not be easily convertible to cash and therefore would not 
meet the definition of liquid assets adopted by CMS in 42 CFR 423.772 
which states that liquid resources are resources that can be converted 
to cash in 20 workdays. The commenters also expressed concern that 
determining the cash value of life insurance could be difficult for 
beneficiaries and would slow down the application process and could 
result in some beneficiaries not filing for the subsidy.
    Response: After careful consideration, we decided not to adopt this 
recommended change. As already discussed in this document, we will 
presume that a financial instrument such as a life insurance policy can 
be converted to cash within 20 workdays. If the individual establishes 
that a particular resource (other than nonhome real property) cannot be 
converted to cash within 20 workdays, it will not be counted as a 
resource. Normally, information about the cash value of an insurance 
policy is readily available to the policy owner, and we have procedures 
to assist beneficiaries who need help determining the value of their 
insurance policies.
    Comment: One commenter expressed concern that the requirement to 
provide the cash value of life insurance policies would be a 
significant burden on beneficiaries. The commenter recommended that SSA 
should work with insurance companies and organizations to develop a 
process to help beneficiaries get this information quickly and 
accurately.
    Response: We agree with the commenter that it is important to 
establish procedures that are not burdensome for beneficiaries. The 
procedure we have developed provides a flexible approach for 
beneficiaries to make it as simple as possible to provide us with the 
correct information. We have issued operating instructions explaining 
these procedures. In addition, our staff will assist beneficiaries who 
find it difficult to provide this information. We have also held 
discussions with representatives of the American Council of Life 
Insurers and the National Association of Insurance Commissioners to ask 
for their assistance in notifying insurers about the kind of 
information we need about an individual's policies and how they can 
help their clients.
    Comment: One commenter recommended that we automatically exclude 
$1,500 in assets for all beneficiaries under the burial exclusion in 
Sec.  418.3425(j). The commenter expressed concern that some 
beneficiaries could be disadvantaged if

[[Page 77673]]

they did not understand the burial exclusion question and answered it 
incorrectly.
    Response: After careful consideration, we decided not to adopt this 
recommended change. The $1,500 burial fund exclusion is based on the 
$1,500 SSI burial fund exclusion in section 1613(d)(1) of the Act. This 
section creates this exclusion, sets the $1,500 limit, and establishes 
the requirement that the individual must expect to use a portion of his 
or her money for burial and related expenses of the individual or 
spouse. The statute does not permit the $1,500 burial exclusion for an 
individual who does not expect any of his or her money to be used for 
burial expenses.
    Comment: Two commenters recommended that pre-paid burial contracts 
should be excluded from determinations of resources because such 
contracts should not be considered liquid resources due to the 
difficulty in converting them to cash. One of the two commenters also 
recommended that irrevocable burial trusts should also be excluded for 
the same reason and that the regulations should provide an explicit 
statement that these burial arrangements are not counted as resources.
    Response: Although we did not specifically mention prepaid burial 
contracts and burial trusts in this regulation, irrevocable burial 
contracts and irrevocable burial trusts will not be considered as 
countable resources for purposes of determining eligibility for the 
subsidy. With the exception of equity in nonhome real property, we 
count only liquid resources for purposes of subsidy eligibility. We 
have revised Sec.  418.3425(b) to clarify that irrevocable burial 
trusts and the irrevocable portion of prepaid burial contracts will not 
be counted as resources.
    Comment: One commenter pointed out that Sec.  418.3425(j) provides 
for a $1,500 exclusion of funds being saved explicitly for burial 
expense but does not incorporate by reference the SSI burial fund 
exclusion in Sec.  416.1231(b) of our rules. Section 416.1231(b) of our 
rules describes the types of funds covered under this exclusion for SSI 
purposes as well as exceptions to the amount of excluded burial funds. 
Because Sec.  418.3425(j) does not incorporate Sec.  416.1231(b) of our 
rules by reference, the commenter recommends that our operating 
instructions should discuss the types of resources that will be 
considered excludable as burial funds and any applicable reductions to 
the excluded amount of burial funds.
    Response: We did not incorporate Sec.  416.1231(b) of our rules by 
reference because the $1,500 burial exclusion applicable for SSI 
resource determinations is different from the $1,500 burial exclusion 
applicable to subsidy determinations. Our operating instructions make 
it clear that for purposes of determining subsidy eligibility, the 
$1,500 burial fund exclusion is applied to any of a beneficiary's 
countable liquid resources if the beneficiary states that he or she 
expects that some of the money will be used for burial expenses. Our 
operating instructions also make it clear that this $1,500 exclusion, 
unlike the SSI burial fund exclusion, is not reduced by the value of 
other burial arrangements that the beneficiary may have such as life 
insurance, a prepaid burial contract, or a burial trust. We believe 
that this approach is consistent with Congressional intent that we 
simplify the subsidy program. However, as explained earlier we will 
count revocable burial contracts and revocable burial trusts as 
resources.

Determinations and the Administrative Review Process

    Comment: Three commenters asked that we allow reopening of our 
decision, after an initial determination has been made and an appeal 
has been filed when the applicant uncovers new information.
    Response: When we receive information after an appeal has been 
filed that would result in a favorable appeal determination, we will 
make our determination using the new information received while the 
appeal is pending. Also, if we discover clerical errors within 60 days 
after we have made an initial determination or decision, we will 
correct those errors and send notice of our revised determination with 
appeal rights to a hearing. We have added a new section to these rules 
at Sec.  418.3678 to clarify this.
    Comment: Seven commenters suggested adding another administrative 
level of appeal in addition to the hearing, and revising the hearing 
process to allow the individual with the option of having a face-to-
face, videoconference, or telephone hearing. They also recommended that 
the regulations specify that TDD/TTY facilities are available if 
needed. The commenters voiced concern that we were not providing 
adequate due process to this low-income population by providing one 
level of appeal, i.e., a hearing by either telephone or case review, as 
some of these individuals cannot afford to file a civil action in 
Federal district court.
    Response: Section 1860D-14 authorizes us to establish procedures 
for appeals of subsidy determinations that are similar to the specified 
SSI appeal procedures, but not identical. The issues arising in a claim 
for a subsidy do not involve the types of complicated medical or 
vocational issues, or issues involving credibility, that are involved 
in claims for SSI disability benefits. The issues involved in subsidy 
hearings can be readily resolved with a case review or a hearing by 
telephone.
    Generally, the issues in a subsidy appeal are the amount of an 
individual's income and resources, living arrangements, and marital 
status. We have developed a simplified application and appeals process 
in keeping with the intent of Congress expressed in the language of the 
MMA. We disagree with the commenters' contention that these rules do 
not provide individuals with adequate due process. In fact, the appeals 
process affords the individual with similar due process rights that are 
provided under the SSI program, including reasonable notice and 
opportunity to request and be provided with a review of our 
determination, the opportunity to examine information and submit new 
information, and the right to present witnesses before we make a 
decision on appeal. Verification of information will consist of a 
comparison of claimant-provided information to data obtained from other 
Federal agencies. We should be able to resolve most issues or 
discrepancies by a telephone call. In addition, individuals who appear 
to be ineligible for a subsidy will receive a pre-decisional notice 
that gives them an opportunity to rebut any issues explained in our 
notice prior to our issuing the initial determination on the 
application. Those who do not provide information or provide 
information that does not change the determination will then receive 
another notice explaining our initial determination and their appeal 
rights.
    We believe that the subsidy hearing provides a simple appeals 
process that ensures subsidy applicants receive decisions quickly. It 
also provides an opportunity for a personal contact with the hearing 
decision-maker who is reviewing the initial determination on the 
subsidy claim and making the appeal decision. A hearing by telephone 
does not require activities such as travel to a hearing, and thus gives 
the individual quick and easy access, generally in his or her own home, 
to the appeal decision-maker. Consequently, the appeals process 
established in these rules provides an efficient and effective means 
for discussing the issues in question. We plan to provide

[[Page 77674]]

individuals who are hearing-impaired or non-English speaking the 
special accommodations they need.
    Comment: Five commenters requested that when an individual requests 
an appeal of a subsidy initial determination we provide a hearing 
before an independent, impartial, and qualified third party who is not 
employed by the agency making the initial determination, preferably an 
administrative law judge (ALJ).
    Response: The hearing decisions will be made by qualified and 
impartial specialists who have had no involvement in the initial 
determination. These specially-trained hearing decision-makers are 
looking at factual information, i.e., income and resources, living 
arrangements, family size, and marital status in making a decision. 
They are well-trained in the policies and procedures relating to the 
eligibility requirements of the Part D subsidy program and 
administrative review process. To ensure compliance and consistency 
with our policies, their telephone interviews will be monitored and a 
sample of their hearing decisions reviewed. We anticipate that our 
quality assurance efforts will lead to expeditious and accurate 
decisions for these subsidy applicants.
    Comment: One commenter asked that we specify whether the case 
review is a de novo determination or a strictly appellate review. A de 
novo case review would require evaluation of the relevant claims file 
evidence along with applicable law. A strictly appellate review accepts 
the initial decision's factual determinations, and then focuses on 
whether or not the adjudicator properly applied relevant law to those 
facts.
    Response: The decision made on appeal will be a de novo review. 
This is consistent with the policies we apply in the SSI program. The 
operating procedures as well as the regulations require that the appeal 
decision-maker must review all facts in the case including those that 
were used in making the initial determination in addition to the 
information received subsequent to the initial determination.
    Comment: Eight commenters have asked that the regulations specify a 
time frame for rendering a decision after an appeal has been requested.
    Response: Our goal is to implement an appeals process that is 
similar to the current SSI hearing process, but which minimizes 
processing time frames and ensures the individual will have our final 
decision on his or her subsidy claim in an expeditious manner.
    Comment: One commenter voiced concern over the lack of aid pending 
the outcome of an appeal.
    Response: The MMA legislation did not authorize us to provide a 
subsidy for applicants awaiting the outcome of the appeal on his or her 
subsidy application. However, once we find the individual to be 
eligible for a subsidy, if the requirements explained in our 
regulations are met, he or she will be entitled to receive his or her 
subsidy until the appeal of our determination to reduce the subsidy or 
to terminate eligibility for a subsidy is decided.
    Comment: Five commenters voiced concern over the lack of standards 
for the hearing appeal decision-maker to use in making a decision.
    Response: We believe that these rules and our operating 
instructions contain the standards for our decision-makers. Our primary 
role is to determine the individual's resources and his or her income 
in relation to the poverty level for the family of the size involved 
and whether or not the individual will be eligible for a full or 
partial subsidy. The hearing decision-makers are specialists trained in 
the policies and procedures relating to the eligibility requirements of 
the Part D subsidy program and administrative review process. As we 
noted previously, to ensure compliance, the hearing decision process 
for the subsidy program will be evaluated continuously. We anticipate 
that our policies and procedures will lead to expeditious and accurate 
decisions.
    Comment: One commenter believes there are a number of areas in 
which the administrative review process is deficient, i.e., a telephone 
rather than an in-person hearing; lack of impartial, independent and 
qualified decision-maker, such as an ALJ; only one level of 
administrative review; process not commensurate with the right to 
judicial review; process not similar to title XVI; does not meet 
requirements of due process under the Fifth Amendment. In addition, the 
commenter expressed concern about whether SSA has tested the concept of 
telephone hearings for millions of low-income individuals; how the 
appeal decision-maker will determine that the person participating in 
the telephone hearing is the applicant; how the appeal decision-maker 
will corroborate the identity of witnesses and make determinations of 
witness credibility over the phone; how an individual will judge 
whether the appeal decision-maker is prejudiced or partial; and what 
constitutes the record that is subject to review in the Federal 
district court.
    Response: We believe that we have already addressed some of the 
concerns of this commenter in our responses to prior comments. The MMA 
requires the Commissioner to establish appeal procedures for Part D 
subsidy determinations which are similar to the procedures in section 
1631(c)(1)(A) of the Act. While section 1631(c)(1)(A) provides a 
statutory right to a hearing, it does not require a hearing before an 
ALJ. Our decision not to use ALJs for this workload is based on our 
conclusion that the specially-trained paralegal professionals making 
the hearing decisions are capable of making findings of fact which are 
involved in making a subsidy eligibility decision. Because the hearing 
decision-makers are SSA employees, as are the ALJs, they are bound by 
the Agency's policies and procedures in making a subsidy decision. 
Moreover, their actions and decisions will be monitored and evaluated.
    As we have stated in our response to prior comments, the subsidy 
determination hearing process conforms to the MMA legislation and the 
requirements of section 1631(c)(1)(A) of the Act. It provides all the 
due process rights afforded individuals under the current insurance 
programs, i.e., proper notice, right to a hearing, right to review and 
right to submit information used in the decision, and right to present 
and question witnesses. Further, we believe that we are implementing a 
process that replicates the current procedures when a civil action is 
filed, and we have prepared instructions concerning how a case should 
be documented and prepared for judicial review. We will perform an 
ongoing evaluation of these court procedures, and plan to make 
adjustments that are found to be necessary.
    The remaining comments on client identification verification, 
testing, and determining prejudicial decision-makers will be addressed 
in operating instructions as well. We are using SSA's current process 
for verifying the identity of the individual with whom we are 
conducting business. Furthermore, we will review our operating 
instructions and determine whether further guidance should be 
considered on these matters. Again, the evaluation of SSA's 
administrative review policies and procedures and the functions of the 
hearing decision-makers will be an ongoing initiative and adjustments 
will be made accordingly.

Other Changes

    In addition to any changes already discussed, we have made a few 
other non-substantive editorial corrections.

[[Page 77675]]

Regulatory Procedures

Executive Order 12866

    We have consulted with the Office of Management and Budget (OMB) 
and determined that these final 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 final 
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 4454 through 4524.
    We have also determined that these final rules meet the plain 
language requirement of Executive Order 12866, as amended by Executive 
Order 13258.
    In addition, we find good cause for dispensing with the 30-day 
effective date of a substantive rule, as provided for by 5 U.S.C. 
553(d)(3). The MMA establishes the Part D prescription drug program 
effective January 1, 2006. Starting in May 2005, we began to mail out 
paper applications with a cover letter and a postage-paid business 
reply envelope to low-income Medicare beneficiaries who appear eligible 
for the subsidy based on financial data available to us. The mailing 
continued through August 2005. In addition, beginning July 1, 2005, 
individuals could apply online on our Web site (Social Security Online) 
for a subsidy. In light of the effective date of this program and our 
obligation to process the subsidy applications, we find it is in the 
public interest to make these rules effective upon publication.

Regulatory Flexibility Act

    We certify that these final 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. 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 4454 through 4524.

Federalism Impact and Unfunded Mandates Impact

    We have reviewed these final 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 final 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 
4454 through 4524.

Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) of 1995 says that no persons are 
required to respond to a collection of information unless it displays a 
valid OMB control number. In accordance with the PRA, SSA is providing 
notice that OMB has approved the information collection requirements 
contained in Sec. Sec.  418.3120 through 418.3670 of these final rules. 
The OMB Control Number for these collections is 0960-0702, expiring May 
31, 2008.

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

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 18, 2005.
Jo Anne B. Barnhart,
Commissioner of Social Security.

0
For the reasons set out in the preamble, we are adding 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 make you ineligible 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?

[[Page 77676]]

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?
418.3678 What is the process for correcting Agency clerical errors?
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 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 (Pub. L. 108-173). Sections 1860D-1 through 1860D-24 
established Part D of title XVIII of the 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 
a Medicare beneficiary, 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 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 418.3680 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. They also contain the rules that explain that our 
decision is binding unless you file an action in Federal district court 
seeking review of our final decision and what happens if your case is 
remanded by a Federal court


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 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) CMS means the Centers for Medicare & Medicaid Services in the 
Department of Health and Human Services.
    (2) Commissioner means the Commissioner of Social Security.
    (3) Section means a section of the regulations in part 418 of this 
chapter unless the context indicates otherwise.
    (4) The Act means the Social Security Act, as amended.
    (5) Title means a title of the Act.
    (6) We, our or us means the Social Security Administration (SSA).
    (b) Miscellaneous.
    (1) Claimant means the person who files an application for himself 
or herself or the person on whose behalf an application is filed.
    (2) Date you receive a notice means 5 calendar days after the date 
on the notice, unless you show us you did not receive it within the 5-
day period.
    (3) Decision means the decision we make after a hearing.
    (4) Determination means the initial determination that we make as 
defined in Sec.  418.3605.
    (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 (Hospital Insurance) or enrolled in Part B 
(Supplementary Medical Insurance) or both under title XVIII of the Act.
    (9) Periods of limitations ending on Federal non-workdays 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 a personal

[[Page 77677]]

representative as defined in 42 CFR 423.772.
    (11) State, unless otherwise indicated, means:
    (i) A State of the United States; or
    (ii) The District of Columbia.
    (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) Subsidy means an amount CMS will pay on behalf of Medicare 
beneficiaries who are eligible for a subsidy of their Medicare Part D 
costs. The amount of a subsidy for a Medicare beneficiary depends on 
the beneficiary's income as related to household size, 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.
    (14) United States when used in a geographical sense means:
    (i) The 50 States; and
    (ii) The District of Columbia
    (1) You or your means the person who applies for the subsidy, the 
person for whom an application is filed or anyone who may consider 
applying for a subsidy.

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 or enrolled in Medicare Part A (Hospital 
Insurance) or enrolled in Medicare Part B (Supplementary Medical 
Insurance) or both 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. Full-benefit dual eligible beneficiaries are in this 
category. If beneficiaries have deemed eligibility status because they 
receive Medicaid coverage, are enrolled in a Medicare Savings Program 
within their State, or receive SSI and have Medicare, then their 
subsidy is effective with the first month they have deemed eligibility 
status.


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:
    (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) What you may do if your circumstances change as described in 
Sec.  418.3120; and
    (4) 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.
    (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 make you ineligible 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 subsidy if any of the following apply to you:
    (a) You lose entitlement to or are not enrolled in Medicare Part A 
and 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 lives 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 resume living together after having been 
separated.
    (6) You and your spouse, who lives with you, have your marriage 
annulled.
    (7) You (or your spouse, who lives with you, if applicable) expect 
your estimated annual income to increase or decrease in the next 
calendar year.
    (8) You (or your spouse, who lives with you, if applicable) expect 
your resources to increase or decrease in the next calendar year.
    (9) Your family size as defined in 42 CFR 423.772 has changed or 
will change

[[Page 77678]]

(other than a change resulting from one of the events in paragraphs 
(a)(1) through (6) of this section).
    (10) 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)(6) 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)(7) 
through (a)(9) 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 after we determine that you are 
eligible 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 
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 on the first day of the month in which the 
application 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 on our Internet Web site 
(www.socialsecurity.gov). 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 one of our employees at one of our offices or by one 
of our employees 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 our Internet Web site. If a State Medicaid 
agency forwards to us a

[[Page 77679]]

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 (unless you can show 
us that you did not receive it within the 5 days) 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 
our Internet 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 our determination 
or decision has become final and binding under Sec.  418.3620. If you 
appeal our initial determination, the determination does not become 
final until we issue a decision on any appeal you have filed under 
Sec.  418.3655 (see Sec.  418.3675) or dismiss the request for a 
hearing under Sec.  418.3670.
    (b) If, at the time your application is filed or before our 
determination or decision becomes final and binding, 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.
    (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 but you 
appear to be in an enrollment period, we will send you a notice 
advising you that we will not make a determination on your application 
until you become entitled to Medicare Part A and/or enrolled in 
Medicare Part B. If you are not entitled to Medicare Part A and/or 
enrolled in Medicare Part B at the time your application is filed and 
you do not appear to be in an enrollment period, we will send you a 
notice advising you that you are not eligible for the subsidy because 
you are not entitled to Medicare Part A and/or enrolled in Medicare 
Part B and explain your appeal rights.


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 our 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) You or your personal representative (as defined in 42 CFR 
423.772) file an application (as defined in Sec.  418.3210) within 60 
days after the date of the notice we will send in response to the 
inquiry. The notice will say that we will make an initial determination 
of your eligibility for a subsidy, 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) You are alive on the first day of the month in which the 
application is filed.

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

[[Page 77680]]

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 we are determining your eligibility 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 (or expect to receive) starting in the month for which 
we determine your eligibility based on your application for a subsidy 
through the end of the year for which we are determining your 
eligibility. 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 as 
explained in Sec.  416.1112(c)(2) of this chapter;
    (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 (or the combined earned 
income 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 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 as described in Sec.  416.1112(c)(8) of this 
chapter that 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 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 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) through (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 consider 
all of the countable unearned income you and your living-with spouse 
receive (or expect to receive) during the year for which we are 
determining your eligibility for this benefit. However, in the first 
year you or your spouse apply

[[Page 77681]]

for the subsidy, we consider all of the countable unearned income both 
you and your living-with spouse receive (or expect to receive) starting 
in the month for which we determine eligibility for you or your living-
with spouse based on 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 premiums.
    (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.
    (f) Social Security Cost-of-Living Adjustment. We will not count as 
income the amount of the cost-of-living adjustment for social security 
benefits for any month through the month following the month in which 
the annual revision of the Federal poverty guidelines is published.


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 less than one-third of the applicable monthly SSI Federal benefit 
rate, we count only the current market value 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(b), (c)(1) through (c)(12), and (c)(14) through (c)(21) 
of this chapter.
    (c) We do not count as income any dividends or interest earned on 
resources you or your spouse own.

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, financial 
accounts, and other financial instruments which can be converted to 
cash within 20 workdays, excluding certain nonworkdays 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), trusts if they are 
revocable, funds in an irrevocable trust if the trust beneficiary can 
direct the use of the funds, and similar items. We will presume that 
these types of resources can be converted to cash within 20 workdays 
and are countable as resources for subsidy determinations. However, if 
the individual establishes that a particular resource cannot be 
converted to cash within 20 workdays, we will not count it as a 
resource.
    (b) We count the equity value of real property as a resource 
regardless of whether it can be sold within 20 workdays. 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. We count the resources of both you and 
your spouse regardless of whether one or both of you apply or are 
eligible for the subsidy if you are married and live with your spouse 
as of the month for which we determine your eligibility based on an 
application for a subsidy, as of the month for which we redetermine 
your eligibility for a subsidy as described in Sec.  418.3125, or as of 
the month for which we determine

[[Page 77682]]

your eligibility due to a change you reported as described in Sec.  
418.3120.
    (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 as described in Sec.  
418.3120.
    (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 you to furnish evidence and 
establish that some or all of the funds in a jointly-held account do 
not belong to you.


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 nonhome real property. Non-
liquid resources are resources that are not liquid resources as defined 
in Sec.  418.3405. Irrevocable burial trusts and the irrevocable 
portion of prepaid burial contracts are considered non-liquid 
resources;
    (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;
    (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 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 expected to be used 
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;

[[Page 77683]]

    (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 
through 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 if your appeal is filed within 10 days after you receive our 
notice. 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 initial 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 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 if your appeal is 
filed within 10 days after you receive our notice.


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) or we revise it as 
provided in Sec.  418.3678.


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

[[Page 77684]]

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.
    (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,

[[Page 77685]]

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 or we revise it as 
provided in Sec.  418.3678. 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.  418.3678  What is the process for correcting Agency clerical 
errors?

    If we become aware within 60 days of the date of our initial 
determination or our decision following a case review or telephone 
hearing, that a clerical error was made in determining whether or not 
you are eligible for a subsidy (either in whole or in part), we may 
issue a revised initial determination which would be effective back to 
the date you originally filed your application or the effective date of 
a subsidy changing event, provided you meet the requirements in Sec.  
418.3101. We may revise an initial determination or decision regardless 
of whether such revised determination or decision is favorable or 
unfavorable to you. If the revised determination or decision (which is 
a new initial determination) is not favorable to you, you will not be 
responsible for paying back any subsidy received prior to the revised 
determination or decision. We will mail you a notice of the revised 
determination which will explain to you that we have made a revised 
determination and that this determination replaces an earlier 
determination, how this determination affects your subsidy eligibility, 
and your right to request a hearing.


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.  418.3625) 
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. 05-24633 Filed 12-29-05; 8:45 am]
BILLING CODE 4191-02-P