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entitled 'Medicare Part D Low-Income Subsidy: Progress Made In 
Approving Applications, but Ability to Identify Remaining Individuals 
Is Limited' which was released on May 8, 2007. 

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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: 

GAO Highlights: 

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

Why GAO Did This Study: 

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. 

What GAO Found: 

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. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-858T]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Barbara Bovbjerg at (202) 
512-7215 or bovbjergb@gao.gov. 

[End of section] 

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.[Footnote 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. 

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.[Footnote 2] Medicare beneficiaries who qualify for full coverage 
under their state's Medicaid program,[Footnote 3] as well as Medicare 
beneficiaries who qualify for more limited Medicaid coverage, 
Supplemental Security Income (SSI), or state Medicare Savings 
Programs[Footnote 4] are automatically enrolled in a prescription drug 
plan by CMS,[Footnote 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." 

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.[Footnote 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. 

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: 

[See PDF for image] 

Source: GAO analysis of SSA data. 

[End of figure] 

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.[Footnote 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.[Footnote 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.[Footnote 
9] 

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.[Footnote 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.[Footnote 11] 

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. 

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

Source of estimate: Congressional Budget Office[B]; 
Eligible but not automatically enrolled[A] (Column A): 6.6; 
SSA subsidy approvals as of as of March 2007 (Column B): 2.2(33%); 
Eligible but not yet enrolled/ current participation rate (Column A 
minus B): 4.4. 

Source of estimate: Access to Benefits Coalition[C]; 
Eligible but not automatically enrolled[A] (Column A): 6.8; 
SSA subsidy approvals as of as of March 2007 (Column B): 2.2(32%); 
Eligible but not yet enrolled/ current participation rate (Column A 
minus B): 4.6. 

Source of estimate: Rice and Desmond[D]; 
Eligible but not automatically enrolled[A] (Column A): 6.9; 
SSA subsidy approvals as of as of March 2007 (Column B): 2.2(32%); 
Eligible but not yet enrolled/current participation rate (Column A 
minus B): 4.7. 

Source of estimate: Centers for Medicare and Medicaid Services[E]; 
Eligible but not automatically enrolled[A] (Column A): 5.6; 
SSA subsidy approvals as of as of March 2007 (Column B): 2.2(39%); 
Eligible but not yet enrolled/current participation rate (Column A 
minus B): 3.4. 

Sources: 

[A] We 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). 

[B] Congressional 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. 

[C] The 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. 

[D] Rice, 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. 

[E] Reported 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. 

[End of table] 

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.[Footnote 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. 

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

[See PDF for image] 

Source: GAO analysis of SSA data. 

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

[End of figure] 

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.[Footnote 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.[Footnote 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. 

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.[Footnote 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. 

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. 

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. 

FOOTNOTES 

[1] Pub. L. 108-173. 

[2] Individuals 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. 

[3] Medicaid 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. 

[4] Medicare 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. 

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

[6] The 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. 

[7] SSA 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. 

[8] Under 26 U.S.C. § 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. 

[9] Department 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. 

[10] Individuals' 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. 

[11] The 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. 

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

[13] The 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. 

[14] Canceled 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. 

[15] This 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. 

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