Medicare Part D Low-Income Subsidy: Progress Made in Approving	 
Applications, but Ability to Identify Remaining Individuals Is	 
Limited (08-MAY-07, GAO-07-858T).				 
                                                                 
To help the elderly and disabled with prescription drug costs,	 
the Congress passed the Medicare Prescription Drug, Improvement, 
and Modernization Act (MMA) of 2003, which created a voluntary	 
outpatient prescription drug benefit (Medicare Part D). A key	 
element of the prescription drug benefit is the low-income	 
subsidy, or "extra help," available to Medicare beneficiaries	 
with limited income and resources to assist them in paying their 
premiums and other out-of-pocket costs. To assess Social Security
Administration's (SSA) implementation of the Medicare Part D	 
low-income subsidy, GAO was asked to review (1) the progress that
SSA has made in identifying and soliciting applications from	 
individuals potentially eligible for the low-income subsidy, and 
(2) the processes that SSA uses to track its progress in	 
administering the subsidy. This statement is drawn from GAO's	 
ongoing study for the committee on the Medicare Part D low-income
subsidy, which is expected to be published at the end of May. To 
conduct this work, GAO reviewed the law, assessed subsidy data,  
and interviewed officials from SSA, the Centers for Medicare and 
Medicaid Services, the Internal Revenue Service, state Medicaid  
agencies, and advocacy groups.					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-858T					        
    ACCNO:   A69305						        
  TITLE:     Medicare Part D Low-Income Subsidy: Progress Made in     
Approving Applications, but Ability to Identify Remaining	 
Individuals Is Limited						 
     DATE:   05/08/2007 
  SUBJECT:   Beneficiaries					 
	     Data collection					 
	     Eligibility determinations 			 
	     Federal social security programs			 
	     Medicare						 
	     Monitoring 					 
	     Performance measures				 
	     Prescription drugs 				 
	     Program evaluation 				 
	     Subsidies						 
	     Program goals or objectives			 
	     Program implementation				 
	     Medicare Part D					 

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GAO-07-858T

   

     * [1]Summary
     * [2]Background
     * [3]Progress Has Been Made in Approving Subsidy Applicants, desp

          * [4]SSA's Initial Outreach Efforts Were Extensive, but Outreach
          * [5]Multiple Barriers Impeded SSA's Outreach Efforts

               * [6]Data Issues Limited SSA's Efforts to Identify the
                 Eligible P
               * [7]Other Barriers Have Limited SSA's Solicitation Efforts

          * [8]Measuring the Success of SSA's Outreach Efforts is Difficult

     * [9]Some of SSA's Application Processes and Operations Lack Key

          * [10]SSA Monitors Performance on Applications Processes, but Lack

               * [11]Determinations
               * [12]Appeals
               * [13]Redeterminations

          * [14]SSA Has Monitored Some Aspects of the Subsidy Program's Impa

     * [15]Conclusions
     * [16]GAO Contacts and Staff Acknowledgments
     * [17]GAO's Mission
     * [18]Obtaining Copies of GAO Reports and Testimony

          * [19]Order by Mail or Phone

     * [20]To Report Fraud, Waste, and Abuse in Federal Programs
     * [21]Congressional Relations
     * [22]Public Affairs

Testimony before the Senate Committee on Finance

United States Government Accountability Office

GAO

For Release on Delivery
Expected at 10:00 a.m. EDT
Tuesday, May 8, 2007

MEDICARE PART D LOW-INCOME SUBSIDY

Progress Made in Approving Applications, but Ability to Identify Remaining
Individuals Is Limited

Statement of Barbara Bovbjerg, Director
Education, Workforce, and Income Security Issues

GAO-07-858T

May 8, 2007

Mr. Chairman and Members of the Committee:

I am pleased to be here to discuss the Social Security Administration's
(SSA) progress in approving individuals for the Medicare Part D low-
income subsidy. High prescription drug costs can have a detrimental effect
on low-income seniors and the disabled, who are more likely than others to
suffer from chronic medical problems requiring prescription drugs. Such
high costs may cause some elderly patients to forgo or restrict their use
of prescription drugs. To help the elderly and disabled with these costs,
the Congress passed the Medicare Prescription Drug, Improvement, and
Modernization Act (MMA) of 2003.^1 MMA enabled Medicare beneficiaries to
enroll voluntarily in drug plans sponsored by private companies. The
benefit includes a low-income subsidy, or "extra help," to assist Medicare
beneficiaries with limited income and resources in paying their premiums
and other out-of-pocket costs.

The Department of Health and Human Services (HHS) and its Centers for
Medicare and Medicaid Services (CMS) is largely responsible for
implementing the new drug benefit, called Medicare Part D, and SSA is
responsible for administering the low-income subsidy. Accordingly, SSA is
responsible for notifying individuals of the subsidy's availability,
taking applications, making subsidy eligibility determinations, resolving
appeals, and ensuring continued subsidy eligibility. SSA also withholds
Part D premiums from Social Security benefits for beneficiaries who select
this option. To assess SSA's implementation of the Part D low-income
subsidy, you asked us to review (1) the progress that SSA has made in
identifying and soliciting applications from individuals potentially
eligible for the low-income subsidy and (2) the processes that SSA uses to
track its progress in administering the subsidy benefit.

My written statement is drawn from our ongoing work for the committee on
the Part D low-income subsidy, for which we expect to provide you a report
at the end of May. We have provided SSA and the Internal Revenue Service
(IRS) with a draft copy of our report, and agency officials are in the
process of preparing their comments. To conduct our work, we interviewed
and obtained documentation from officials responsible for implementing the
subsidy at SSA headquarters and at eight SSA field offices in Maryland,
Virginia, Pennsylvania, and Texas. We also obtained and discussed relevant
documentation on SSA's outreach efforts to target the low-income
population and methods for obtaining input from state Medicaid agencies.
We reviewed available data on SSA's processes for making eligibility
determinations, resolving appeals, and making redeterminations, but were
unable to verify the reliability of the data. We interviewed CMS officials
and obtained documentation on the agency's involvement with SSA's outreach
efforts. We interviewed officials at the IRS concerning legal restrictions
on its ability to release tax data to SSA. We met with various advocacy
groups that represent low-income and disabled beneficiaries to obtain
their perspectives on SSA's implementation of the low-income subsidy. We
conducted our work from May 2006 through April 2007 in accordance with
generally accepted government auditing standards.

^1Pub. L. 108-173.

Summary

In summary, SSA approved approximately 2.2 million Medicare beneficiaries
for the low-income subsidy as of March 2007, despite barriers that limited
its ability to identify individuals who were eligible for the subsidy and
solicit applications. However, the success of SSA's outreach efforts is
uncertain because there are no reliable data to identify the eligible
population. SSA officials had hoped to use IRS tax data to identify the
eligible population, but there are legal limits on IRS's ability to
release such data to SSA unless an individual has already applied for the
subsidy. Even if SSA could use the data, IRS officials question their
usefulness. Instead, SSA used income records and other government data to
identify 18.6 million Medicare beneficiaries who might qualify for the
subsidy, which was considered an overestimate of the eligible population.
SSA mailed low-income subsidy information and applications to the Medicare
beneficiaries it identified, and conducted an outreach campaign of 76,000
events nationwide. However, since the initial campaign ended, SSA has not
developed a comprehensive plan specific to its low-income subsidy outreach
activities to guide its continuing efforts. SSA's efforts were hindered by
beneficiaries' confusion about the distinction between applying for
subsidy and signing up for the Medicare prescription drug benefit, and the
reluctance of some potential applicants to share personal financial
information, among other factors.

SSA has collected data and established some goals to monitor its progress
in administering the subsidy, but still lacks data and measurable goals in
some key areas. While SSA tracks various subsidy application processes
through its Medicare database, it has not established goals to monitor its
performance in all application processes. For example, SSA tracks the time
for resolving appeals and the outcomes of its initial redeterminations of
subsidy eligibility, but does not measure the amount of time it takes to
process individual redetermination decisions. According to SSA officials,
implementing the low-income subsidy was manageable overall, due to
increased funding for its MMA start up costs, and did not significantly
affect the agency's workload and operations.

We are considering recommendations for SSA to work with IRS to assess the
extent to which taxpayer data could help identify individuals who might
qualify for the subsidy, and help improve estimates of the eligible
population; and for SSA to develop a plan to guide its continuing outreach
efforts and develop key management tools to measure the results of its
subsidy application processes.

Background

All Medicare beneficiaries entitled to benefits under Medicare Part A or
enrolled in Part B are eligible to enroll in Medicare Part D.^2 Medicare
beneficiaries who qualify for full coverage under their state's Medicaid
program,^3 as well as Medicare beneficiaries who qualify for more limited
Medicaid coverage, Supplemental Security Income (SSI), or state Medicare
Savings Programs^4 are automatically enrolled in a prescription drug plan
by CMS,^5 automatically qualify for the full subsidy of their premium and
deductible, and do not need to file an application. They are referred to
as "deemed."

^2Individuals who are eligible for Medicare automatically receive Hospital
Insurance, known as Part A, which helps pay for hospital stays, related
post-hospital care, home health services, and hospice care, and typically
does not require a monthly premium. Medicare also offers optional
insurance under Supplementary Medical Insurance (Part B) to cover doctor's
services and outpatient care, and requires a premium.

^3Medicaid is a federal and state program that helps pay medical costs for
certain low-income people, such as those who are 65 and older, the blind,
the disabled, and members of families with dependent children or qualified
pregnant women or children. Prior to the effective date of Part D,
Medicaid provided coverage for outpatient prescription drug costs for
persons eligible for that program.

^4Medicare Savings Programs are offered by state Medicaid agencies to
assist people with limited income and resources with their Medicare
premiums and, in some cases, may also pay Part A and Part B deductibles
and coinsurance.

^5The automatic enrollment in the Part D prescription drug benefit only
applies if beneficiaries do not enroll on their own.

Other Medicare beneficiaries who do not automatically qualify for the
subsidy (i.e., who are not deemed) must apply and meet the income and
resource requirements. These beneficiaries generally qualify if they have
incomes below 150 percent of the federal poverty level and have limited
resources. Generally, in 2007, individuals qualify if they have an income
of less than $15,315 and have resources of less than $11,710; couples
qualify if they have a combined income of $20,535 and resources of
$23,410.^6 The amount of the subsidy for premiums, deductibles,
copayments, and catastrophic coverage varies, depending on income and
resources. Subsidy benefits are provided to these individuals on a sliding
scale, depending on their income and resources.

Individuals generally apply for the benefit directly through SSA, although
they may also apply through their state Medicaid office. The agency that
receives an application, whether SSA or a state Medicaid agency, is
responsible for making initial subsidy determinations and deciding appeals
and redeterminations. Those who apply through SSA may submit their subsidy
application using SSA's paper application or an Internet application form.
Applicants may also have their information entered electronically by
visiting an SSA field office or by calling SSA's toll-free phone line.
Under the MMA, beneficiaries may also apply for the subsidy through their
state Medicaid office. However, according to state Medicaid officials we
spoke with, they encouraged beneficiaries to apply for the subsidy through
SSA whenever possible. As of March 2007, only the Colorado and Kansas
state Medicaid agencies had made Part D subsidy determinations.

Under the MMA, the Congress provided SSA with a $500 million appropriation
from the Federal Hospital Insurance Trust Fund and the Federal
Supplementary Medical Insurance Trust Fund to pay for the initiation of
SSA's Part D responsibilities, and the activities for other MMA
responsibilities for fiscal years 2004 and 2005, but later extended the
appropriation to fiscal year 2006. Since January 2006, SSA officials told
us that the agency has had to draw on its overall administrative
appropriation to support its Part D activities.

^6The resource limits are based on three times the resource limit of the
SSI program for subsidy beneficiaries that qualify for the full subsidy in
2006, with subsequent limits updated each year based on the Consumer Price
Index (CPI); for beneficiaries that qualify for less than the full
subsidy, the resource limits are based on specific dollar amounts set in
the MMA, which are updated each year based on the CPI. Countable resources
include such things as savings, investments, and real estate (other than
an individual's primary residence). Countable resources do not include
such things as a car, a burial plot or limited funds set aside for burial
expenses, or certain other personal possessions.

Progress Has Been Made in Approving Subsidy Applicants, despite Barriers, but
Measuring Success Is Difficult

SSA has approved 2.2 million applicants for the subsidy as of March 2007,
despite some barriers, but measuring their success is difficult because no
reliable data are available to identify the eligible population. SSA
officials told us that their outreach goal was to inform all individuals
potentially eligible for the subsidy and provide them an opportunity to
apply for the benefit. Because the agency lacked access to reliable data
that might help target their outreach efforts more narrowly, SSA used
income records and other government data to identify a broad group of
potentially eligible individuals. Outreach efforts were further limited by
several barriers to soliciting applications. Since its initial outreach
campaign, SSA has not developed a comprehensive plan to identify its
continued outreach efforts apart from other activities.

SSA's Initial Outreach Efforts Were Extensive, but Outreach Has since Decreased

SSA conducted its initial outreach campaign from May 2005 to August 2006,
but has decreased its efforts since then. SSA sent targeted mailings,
which included an application for the subsidy and instructions on how to
apply, to the 18.6 million individuals it had identified as potentially
eligible. After the subsidy applications were mailed, a contractor then
made phone calls to 9.1 million beneficiaries who had not responded to the
initial mailing. SSA also conducted other follow up efforts, including
sending notices to individuals whom the contractor was unable to contact
and to specific subgroups that it identified as having a high likelihood
of qualifying for the subsidy, such as the disabled; individuals 79 years
of age and older living in high-poverty areas; and individuals in
Spanish-speaking, Asian-American, and African-American households.

The outreach efforts also included over 76,000 events conducted in
collaboration with federal, state, and local partners, such as CMS, state
Medicaid agencies, state health insurance programs, and advocacy groups
for Medicare beneficiaries. Events were held at senior citizen centers,
public housing authorities, churches, and other venues. As figure 1 shows,
the number of outreach events has declined significantly, from a high of
12,150 in July 2005 to 230 at the completion of the campaign in August
2006.

Figure 1: Total Number of SSA Outreach Events from May 2005 to August 2006

Although the initial campaign has ended, SSA is continuing to solicit
applications. For example, SSA has conducted various activities to inform
individuals in rural and homeless communities about the subsidy, and is
planning to launch a new strategy this week for Mother's Day to inform
relatives and caregivers--the sons, daughters, grandchildren and family
friends---about the subsidy. SSA has incorporated its strategy for
continuing outreach efforts for the subsidy into its National
Communications Plan. However, it has not developed a comprehensive plan
that specifically identifies those efforts separate from other agency
activities. As a result, SSA has a limited basis for assessing its
progress and identifying areas that require improvement.

Multiple Barriers Impeded SSA's Outreach Efforts

  Data Issues Limited SSA's Efforts to Identify the Eligible Population

SSA did not have access to data that might have helped to narrowly target
the eligible population. Because of the lack of reliable data for
identifying the entire population, SSA broadly targeted 18.6 million
individuals who might be eligible for the subsidy. SSA identified the
target population by using income data from various government sources to
screen out Medicare beneficiaries whose income made them ineligible for
the Part D subsidy. ^7 SSA realized that using these data sources would
result in an overestimate of the number of individuals who might qualify
for the subsidy, because the data provided limited information on
individuals' resources or nonwage income. SSA officials said they took
this approach to ensure that all Medicare beneficiaries who were
identified as potentially eligible for the subsidy were made aware of the
benefit and had an opportunity to apply for it.

SSA officials said that they would have preferred to specifically target
Medicare beneficiaries who were likely to be eligible for the subsidy by
using tax data from IRS on individuals' wage, interest, and pension
income. Current law permits SSA to obtain income and resource data from
IRS to assist in verifying income and resource data provided on subsidy
applications.^8 The law, however, prohibits IRS from sharing such data
with SSA to assist with outreach efforts. According to SSA officials, such
data would allow SSA to identify individuals to target for more direct
outreach and to estimate how many individuals qualify for the subsidy. In
November 2006, the HHS Office of Inspector General reported that
legislation is needed to provide SSA and CMS access to income tax data to
help the agencies more effectively identify beneficiaries potentially
eligible for the subsidy.^9

7SSA obtained income data from its earnings records, as well as data from
the Office of Personnel Management, the Department of Veterans Affairs,
the Railroad Retirement Board, and the Office of Child Support Enforcement
of the Department of Health and Human Services.

^8Under 26 U.S.C. S 6103(1)(7)(C), IRS may only provide tax return
information to SSA for purposes of, and to the extent necessary in,
determining the eligibility for or the correct amount of benefits provided
through the subsidy program. In signing the application form, individuals
acknowledge that SSA will compare the information reported by them on the
form to information supplied by federal, state, and local government
agencies, including the IRS.

SSA officials believe IRS income tax data could provide access to
information on individuals' income and resources. However, IRS officials
told us that its data have many limitations. For example, IRS officials
said that they have limited data on resources for individuals whose income
is less than $20,000, because these individuals do not typically have
interest income, private pensions, or dividend income from stocks that
could assist SSA in estimating an individual's potential resource level.
Also, the officials said that many people with low incomes do not have
incomes high enough to require them to file taxes, and therefore, IRS
might not have information on them.^10 IRS also explained that its tax
data would most likely identify individuals that would not qualify for the
subsidy, rather than individuals that would qualify. Moreover, the IRS
officials said that the data it would provide to SSA to determine
eligibility could be almost 2 years old. For example, for subsidy
applications filed in early 2007, the last full year of tax data the IRS
could provide would be for 2005. Given these factors, IRS officials stated
that summarily sharing private taxpayer data to identify individuals who
could qualify for the subsidy, and the potential cost of systems changes,
would have to be weighed against the added value of the data. No effort
has been undertaken to determine the extent to which IRS data could help
SSA or improve estimates of the eligible population. Legislation is
currently pending before the Congress to permit IRS to share taxpayer data
with SSA to assist the agency in better identifying individuals who might
be eligible for the subsidy.

  Other Barriers Have Limited SSA's Solicitation Efforts

SSA's efforts to solicit applications were hindered by beneficiaries'
confusion about applying for subsidy and the drug benefit. According to
SSA field office staff and state Medicaid and advocacy group officials,
many individuals were confused about the difference between the
prescription drug benefit and the subsidy, and did not understand that
they involved separate application processes. Consequently, some
individuals thought that once they were approved for the subsidy, they
were also automatically enrolled in a prescription drug plan.
Additionally, some individuals were reluctant to apply because they did
not want to share their personal financial information for fear that an
inadvertent error on the application could subject them to prosecution
under the application's perjury clause.^11

9Department of Health and Human Services, Office of Inspector General,
Identifying Beneficiaries Eligible for the Medicare Part D Low-Income
Subsidy. OEI-03-06-00120. Washington, D.C.: Nov. 17, 2006.

^10Individuals' income, filing status, and age generally determine whether
they must file an income tax return. For example, in 2006, single
individuals 65 or older were not required to file tax returns if their
income was less than $9,700, and married couples 65 or older filing
jointly were not required to file tax returns if their combined income was
less than $18,900.

Though individuals have become more educated about the subsidy, concerns
remain about eligibility requirements and the overall complexity of the
application. SSA field office staff and advocacy group officials have
concerns that the eligibility requirements set by the MMA may be a
barrier. For example, they said that the subsidy's resource test may
render some low-income individuals ineligible because of retirement
savings or the value of other resources. Legislation has been proposed to
increase the resource limit. Advocacy group officials have also said that
the application may be too complex for many elderly and disabled
beneficiaries to understand and complete without the assistance of a third
party. SSA headquarters officials told us they worked with various focus
groups to develop the subsidy application and that they have revised the
application several times to address such concerns, but that much of the
information that applicants may view as complex is required by the MMA.

Measuring the Success of SSA's Outreach Efforts is Difficult

The success of SSA's efforts is uncertain because no reliable data exist
on the total number of individuals potentially eligible for the subsidy.
Using available estimates of the potentially eligible population, SSA
approved 32 to 39 percent of the eligible population who were not
automatically deemed by CMS for the subsidy. According to these estimates
by CMS, the Congressional Budget Office, and other entities, about 3.4
million to 4.7 million individuals are eligible for the subsidy, but have
not yet enrolled (See table 1.) In developing these estimates, however,
these entities faced the same data limitations as SSA in identifying
potentially eligible individuals.

^11The perjury clause states that an individual could face imprisonment or
other penalties for making a false or misleading statement about
information provided on the subsidy application.

Table 1: Medicare Part D Low-Income Subsidy Estimates of the Eligible
Population Who Must Apply to Receive the Subsidy (Numbers in millions)

                                          SSA subsidy                         
                      Eligible but not   approvals as    Eligible but not yet 
                         automatically of as of March        enrolled/current 
                            enrolled^a   2007 (Column      participation rate 
Source of estimate       (Column A)             B)      (Column A minus B) 
Congressional                   6.6       2.2(33%)                     4.4 
Budget Office^b                                                            
Access to Benefits              6.8       2.2(32%)                     4.6 
Coalition^c                                                                
Rice and Desmond^d              6.9       2.2(32%)                     4.7 
Centers for                     5.6       2.2(39%)                     3.4 
Medicare and                                                               
Medicaid                                                                   
Services^e                                                                 

Sources:

aWe derived these numbers by subtracting the 7.6 million beneficiaries
that CMS estimated in January 2007 were deemed for the subsidy, or had
comparable coverage from other federal programs, from the sources'
original estimates of all eligible beneficiaries (except for the Rice and
Desmond estimate, which included only undeemed beneficiaries).

bCongressional Budget Office (CBO), A Detailed Description of CBO's Cost
Estimate for the Medicare Prescription Drug Benefit, table 8, July 2004,
Washington, D.C. CBO estimated that an overall total of 14.2 million
beneficiaries would be eligible for the subsidy in 2006.

cThe Access to Benefits Coalition (Pathways to Success, page 1), 2005,
Washington, D.C. The coalition estimated that an overall total of 14.4
million beneficiaries would be eligible for the subsidy in 2006.

dRice, T. and Desmond, K. January 2006. "Who Will Be Denied Medicare
Prescription Drug Subsidies Because of the Asset Test?" The American
Journal of Managed Care. 12 (1), pp.46-54, January 2006. The authors
estimated that a total of approximately 6.9 million eligible individuals
would not be dual eligible beneficiaries, as of January 2006.

eReported in CMS Press release, "Medicare Drug Plans Strong and Growing:
Beneficiaries Compared Plans and Continued to Sign Up for Prescription
Drug Coverage, "January 30, 2007, Washington, D.C. CMS estimated that an
overall total of 13.2 million beneficiaries were eligible in 2006.

SSA officials said that it is unfair to judge the success of its outreach
efforts for the subsidy in relation to the estimates of the total eligible
population, given the limitations in identifying it. SSA officials stated
that their efforts have been successful in meeting their outreach goals.
In fact, after almost 2 years of implementation efforts, SSA's
participation rate compares favorably to that of the Food Stamp Program,
which had a participation rate of 31 percent after its second year of
implementation. The low-income subsidy participation rate compares less
favorably, however, to that of the Supplemental Security Income program,
which had a participation rate of approximately 50 percent among the aged
a year after the program began. SSA officials noted that the SSI
participation rate included individuals who were automatically transferred
from state government programs to SSI, which is somewhat similar to the
"deemed" population that was automatically transferred to the low-income
subsidy.

Some of SSA's Application Processes and Operations Lack Key Tools for Monitoring
Performance

SSA has collected data and established some goals to monitor its progress
in implementing and administering the subsidy benefit, but still lacks
data and measurable goals in some key areas. To enable agencies to
identify areas in need of improvement, GAO internal control standards
state that agencies should establish and monitor performance measures and
indicators.^12 Accordingly, agencies should compare actual performance
data against expected goals and analyze the differences.

SSA Monitors Performance on Applications Processes, but Lacks Data and Goals on
Others

  Determinations

SSA monitors various aspects of its determination process, such as the
number of applications received and their outcomes and length of
processing, but did not establish a performance goal for processing times
until March 2007. SSA largely relies on an automated process to determine
individuals' eligibility for the subsidy. Income and resource data
provided by the applicant are electronically compared to income data
provided by IRS and other agencies to determine if the individual meets
income and resource requirements. SSA field office staff follow up with
individuals in cases where there are conflicting data or questions. SSA
tracks the number of eligibility determinations, the outcome of those
determinations, and the length of time for completing the determinations.
SSA also tracks denials and periodically samples denied claims to examine
the reasons for such actions.

As of March 2007, approximately 6.2 million individuals had applied for
the subsidy. SSA received the heaviest volume of applications when the
public outreach campaign was the most active. Figure 2 provides data on
the cumulative number of subsidy applicants and approvals from November
2005, when SSA began tracking the data, to December 2006.

^12GAO, Internal Control Standards: Internal Control Management and
Evaluation Tool, [23]GAO-01-1008G (Washington, D.C.: August 2001).

Figure 2: Cumulative Number of Subsidy Applicants and Approvals, November
2005 to December 2006

Note: SSA did not have data available for the months of June, August,
September, and November of 2006.

While SSA has captured data on the length of time it takes to make
eligibility determinations, it did not develop the capability to report
the data, and did not establish a performance goal for processing times
until March 2007. SSA has now established a goal of processing 75 percent
of subsidy applications in 60 days.^13 Of the approximately 6.2 million
individuals who had applied for the subsidy as of March 2007, SSA approved
2.2 million, denied 2.6 million, and had decisions pending for 80,000
applicants. SSA officials determined that no decision was required for 1.4
million because they were duplicate applications, applications from
individuals automatically qualified for the subsidy, or canceled
applications.^14 To identify reasons for subsidy denials, SSA conducted
three separate studies that sampled a total of 1,326 denied claims. These
studies showed that 47 percent of applicants were denied due to resources
and 44 percent because of income that exceeded allowable limits set by the
MMA. SSA officials stated that they plan to conduct a longitudinal study
to examine the reasons for all denied claims.

^13The processing time includes a built-in 20-day delay as part of the
predecisional process and the 10-14 days that it takes to receive
verification data from IRS.

  Appeals

SSA tracks data on the total number of appeals, the reason for appeals,
the time it takes to process them, the method used to resolve them, and
their final disposition. Individuals may appeal denied claims, as well as
the level of the subsidy, by calling SSA's national toll-free number,
submitting the request in writing, or visiting any Social Security field
office. Individuals may also complete an appeals form available on SSA's
Web site and mail it to SSA. Individuals have the choice of having their
appeal conducted through a telephone hearing or a case file review.
According to SSA, about 79,000, or 3 percent of denied subsidy
applications were appealed from August 2005 to February 2007. SSA
completed about 76,000 appeals in that time frame. On the basis of an SSA
sample of 781 appeals, SSA reversed its decision for 57 percent of the
cases and upheld its decision for the remaining 43 percent.

SSA data show that the overall volume of appeals received was the highest
between November 2005 and July 2006, declined between August and November
2006, and rose again between December 2006 and February 2007. During the
decline, SSA closed all but one of its six Special Appeals Units by
October 2006. Further, the time it took SSA to process appeals varied
widely, and did not necessarily decrease when the caseloads grew smaller.

  Redeterminations

SSA tracks various results from the redeterminations process, such as the
number of decisions made, and number and level of continued subsidies.
However, SSA does not track processing time for redetermination decisions
and has not established a performance time target for processing such
actions. According to the MMA and SSA regulations, all recipients of the
subsidy are required to have their eligibility redetermined within 1 year
after SSA first determines their eligibility.^15 Future redeterminations
are required to be conducted at intervals determined by the Commissioner.
SSA's regulations provide that these periodic redeterminations be based on
the likelihood that an individual's situation may change in a way that
affects subsidy eligibility. Additionally, SSA's regulations provide that
unscheduled redeterminations may take place at any time for individuals
who report a change in their circumstances, such as marriage or divorce.
SSA officials stated that since the redeterminations process is conducted
within a certain period of time, it is unnecessary to track the processing
time for individual redetermination decisions.

^14Canceled applications included applications that were withdrawn by the
applicant or applications that were canceled by SSA because the applicant
was not eligible for Medicare, as required to qualify for the subsidy.

SSA initiated its first cycle of redeterminations in August 2006, which
including all of the approximately 1.7 million individuals who were
determined to be eligible for the subsidy prior to April 30, 2006. SSA
excluded from the redeterminations process about 562,000 individuals who
were either deceased, automatically deemed eligible for the benefit by
CMS, or whose subsidy benefit had been terminated. SSA data show that as
of February 2007, SSA had completed approximately 237,000
redeterminations. About 69,000 individuals remained at the same subsidy
level, another 69,000 had a change in their subsidy level, and 98,000
individuals had their subsidies terminated, based on a change in their
circumstances.

SSA Has Monitored Some Aspects of the Subsidy Program's Impact on SSA's
Workload, and Increased Funding Helped SSA Manage the Increased Workload

SSA has monitored some aspects of the increased workload and found that
implementing the low-income subsidy was manageable overall, due to
increased funding for its MMA startup costs. Although the subsidy program
affected SSA's workload and operations, SSA officials told us that
implementing the subsidy did not significantly affect the agency's
workload and operations. SSA hired a total of 2,200 field office staff to
assist with subsidy applications, as well as an additional 500
headquarters staff to support its MMA activities. SSA officials attribute
the light impact of the subsidy program to various factors, including the
automation of the subsidy application process and the $500 million
appropriation it received for administrative startup costs to implement
its MMA responsibilities. SSA officials pointed out that as they
implemented the subsidy, the processing times for other workloads
improved. Officials explained that they were able to manage the other
workloads because the peak increases in subsidy applications and inquiries
were short-lived, allowing SSA's operations to return to a more normal
operating level after handling these peak work volumes. SSA officials
stated that they expect small increases in its low-income subsidy workload
during future prescription drug plan open seasons, which are typically
held from November to December.

^15This does not include individuals who continue to be deemed or
automatically eligible for the subsidy. Individuals who report changes to
SSA regarding their benefit status are also excluded from the initial
redetermination process since they are redetermined as a result of the
change.

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

Recent increases in SSA's administrative resources may have also been a
factor in limiting the impact of the subsidy program workload. The amount
of SSA's administrative costs covered by the Medicare Trust Funds is
projected to increase by about 37 percent between fiscal year 2003 and
fiscal year 2008. This increase occurred despite the transfer of the
Medicare appeals processing function from SSA to CMS in 2005. While this
increase has helped SSA to carry out its various Medicare responsibilities
(such as taking applications for Medicare benefits and withholding
Medicare premiums, among others), it may have also helped to cushion the
impact of the subsidy program.

Conclusions

Reaching the millions of people who are forgoing the government's help in
paying for their prescription drug benefit remains a significant
challenge. Using the $500 million appropriation for its MMA start up
costs, SSA was able to initiate the Part D subsidy and sign up 2 million
people for the subsidy without adversely affecting SSA's overall
operations. However, while it is not clear how to reach the remaining
eligible people, the momentum of the initial outreach campaign should not
be lost. The barriers to identifying eligible people and convincing them
to sign up remain. For some, the subsidy application is complicated, which
is due in part to the low-income subsidy eligibility requirements.
Further, no one has yet studied whether or not IRS data can help
identification efforts. While advocacy groups have called for a more
personalized outreach approach to encourage additional enrollments, it may
be unrealistic to expect SSA to conduct such efforts, given its resource
limitations. Both a better understanding of who is eligible and a plan for
continued outreach could help SSA make efficient use of limited staff
resources by targeting outreach more narrowly to the eligible population.

Further, a timely and reliable process for deciding initial
determinations, hearing appeals, and making redeterminations is essential
to effective management of the subsidy. SSA has focused on developing and
improving the processes for serving its customers in a timely manner. As
SSA moves forward, it may need better information to ensure that the
subsidy program serves its target population as efficiently and
effectively as possible.

We are considering recommendations for SSA to work with IRS to assess the
extent to which taxpayer data could help identify individuals who might
qualify for the subsidy, and help improve estimates of the eligible
population; and for SSA to develop a plan to guide its continuing outreach
efforts and develop key management tools to measure the results of its
subsidy application processes.

Mr. Chairman, this completes my prepared statement. I would be happy to
respond to any questions you or other members of the committee may have at
this time.

GAO Contacts and Staff Acknowledgments

For further information regarding this testimony, please contact Barbara
D. Bovbjerg, Director, Education, Workforce, and Income Security Issues,
on (202) 512-7215. Blake Ainsworth, Jeff Bernstein, Mary Crenshaw, Lara L.
Laufer, Sheila McCoy, Kate France Smiles, Charles Willson, and Paul
Wright, also contributed to this statement.

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Highlights of [31]GAO-07-858T , a testimony before the Senate Committee on
Finance

May 8, 2007

MEDICARE PART D LOW-INCOME SUBSIDY

Progress Made in Approving Applications, but Ability to Identify Remaining
Individuals Is Limited

To help the elderly and disabled with prescription drug costs, the
Congress passed the Medicare Prescription Drug, Improvement, and
Modernization Act (MMA) of 2003, which created a voluntary outpatient
prescription drug benefit (Medicare Part D). A key element of the
prescription drug benefit is the low-income subsidy, or "extra help,"
available to Medicare beneficiaries with limited income and resources to
assist them in paying their premiums and other out-of-pocket costs.

To assess Social Security Administration's (SSA) implementation of the
Medicare Part D low-income subsidy, GAO was asked to review (1) the
progress that SSA has made in identifying and soliciting applications from
individuals potentially eligible for the low-income subsidy, and (2) the
processes that SSA uses to track its progress in administering the
subsidy.

This statement is drawn from GAO's ongoing study for the committee on the
Medicare Part D low-income subsidy, which is expected to be published at
the end of May. To conduct this work, GAO reviewed the law, assessed
subsidy data, and interviewed officials from SSA, the Centers for Medicare
and Medicaid Services, the Internal Revenue Service, state Medicaid
agencies, and advocacy groups.

SSA approved approximately 2.2 million Medicare beneficiaries for the
low-income subsidy as of March 2007, despite barriers that limited its
ability to identify individuals who were eligible for the subsidy and
solicit applications from them. However, the success of SSA's outreach
efforts is uncertain because there are no reliable data to identify the
eligible population. SSA officials had hoped to use Internal Revenue
Service (IRS) tax data to identify the eligible population, but the law
prohibits the use of such data unless an individual has already applied
for the subsidy. Even if SSA could use the data, IRS officials question
its usefulness. Instead, SSA used income records and other government data
to identify 18.6 million Medicare beneficiaries who might qualify for the
subsidy, which was considered an overestimate of the eligible population.
SSA mailed low-income subsidy information and applications to these
Medicare beneficiaries and conducted an outreach campaign of 76,000 events
nationwide. However, since the initial campaign ended, SSA has not
developed a comprehensive plan to distinctly identify its continuing
outreach efforts apart from other agency activities. SSA's efforts were
hindered by beneficiaries' confusion about the distinction between
applying for the subsidy and signing up for the prescription drug benefit,
and the reluctance of some potential applicants to share personal
financial information, among other factors.

SSA has collected data and established some goals to monitor its progress
in administering the subsidy, but still lacks data and measurable goals in
some key areas. While SSA tracks various subsidy application processes
through its Medicare database, it has not established goals to monitor its
performance for all application processes. For example, SSA tracks the
time for resolving appeals and the outcomes of its initial
redeterminations of subsidy eligibility, but does not measure the amount
of time it takes to process individual redetermination decisions.
According to SSA officials, implementing the low-income subsidy was
manageable overall due to increased funding for the outreach and
application processes and did not significantly affect the agency's
workload and operations.

GAO is considering recommendations for SSA to work with IRS to assess the
extent to which taxpayer data could help identify individuals who might
qualify for the subsidy, and help improve estimates of the eligible
population; and for SSA to develop a plan to guide its continuing outreach
efforts and develop key management tools to measure the results of its
subsidy application processes.

References

Visible links
  23. http://www.gao.gov/cgi-bin/getrpt?GAO-01-1008G
  24. http://www.gao.gov/
  31. http://www.gao.gov/cgi-bin/getrpt?GAO-07-858T
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