Medicare Part D Low-Income Subsidy
SSA Continues to Approve Applicants, but Millions of Individuals Have Not Yet Applied Gao ID: GAO-08-812T May 22, 2008To help the elderly and disabled with prescription drug costs, the Congress passed the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA), 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 the Social Security Administration's (SSA) implementation of the subsidy, GAO is providing information on (1) the number of applicants approved for or denied the low-income subsidy and (2) challenges of identifying individuals eligible for the subsidy and targeting outreach efforts. This statement is based on a prior GAO report on the subsidy and associated spending issued in May 2007, selected aspects of which we updated in May 2008.
Of the approximately 7.2 million applicants for the low-income subsidy, SSA approved approximately 2.8 million as of March 2008, and SSA has improved some key measures for its subsidy application processes. SSA approved about 570,000 applicants, denied about 403,000 applicants, and determined that no decision was required for about 281,000 applicants in fiscal year 2007. Excess income was the primary reason applicants were denied benefits, while many other applicants were denied benefits because their resources exceeded program limits. Further, SSA has collected data and established some goals to monitor its progress in implementing and administering the subsidy benefit. No reliable data are available to help SSA identify the eligible population for its outreach efforts, and millions who may be eligible have not yet applied. SSA maintains that it would not be able to establish specific goals and measures for its outreach activities, as we recommended in our May 2007 report because, of the lack of reliable data on the total eligible population. Responding to another of our recommendations, SSA is working with the Internal Revenue Service to determine if tax data can help target individuals eligible for the subsidy. The Centers for Medicare & Medicaid Services and the Congressional Budget Office have estimated, respectively, that about 2.6 million to over 4 million individuals who may qualify for the subsidy are not receiving it. Various barriers, such as reluctance to disclose personal financial information or lack of knowledge of the subsidy, may prevent potentially eligible Medicare beneficiaries from applying for the subsidy. To solicit applications from individuals potentially eligible for the subsidy, SSA conducted an extensive outreach campaign from May 2005 to August 2006, but has decreased its outreach activities since then. Staffing constraints in SSA field offices may also limit SSA's ability to assist individuals with the subsidy and conduct local outreach to inform the public about the subsidy.
GAO-08-812T, Medicare Part D Low-Income Subsidy: SSA Continues to Approve Applicants, but Millions of Individuals Have Not Yet Applied
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Testimony:
Before the Special Committee on Aging, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery Expected at 10:30 a.m. EDT:
Thursday, May 22, 2008:
Medicare Part D Low-Income Subsidy:
SSA Continues to Approve Applicants, but Millions of Individuals Have
Not Yet Applied:
Statement of Barbara D. Bovbjerg, Director Education, Workforce, and
Income Security Issues:
GAO-08-812T:
GAO Highlights:
Highlights of GAO-08-812T, a report to the Special Committee on Aging,
U.S. Senate.
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 of 2003 (MMA), 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 the Social Security Administration‘s (SSA) implementation of
the subsidy, GAO is providing information on (1) the number of
applicants approved for or denied the low-income subsidy and (2)
challenges of identifying individuals eligible for the subsidy and
targeting outreach efforts.
This statement is based on a prior GAO report on the subsidy and
associated spending issued in May 2007, selected aspects of which we
updated in May 2008.
What GAO Found:
Of the approximately 7.2 million applicants for the low-income subsidy,
SSA approved approximately 2.8 million as of March 2008, and SSA has
improved some key measures for its subsidy application processes. SSA
approved about 570,000 applicants, denied about 403,000 applicants, and
determined that no decision was required for about 281,000 applicants
in fiscal year 2007. The table below shows that excess income was the
primary reason applicants were denied benefits, while many other
applicants were denied benefits because their resources exceeded
program limits. Further, SSA has collected data and established some
goals to monitor its progress in implementing and administering the
subsidy benefit.
No reliable data are available to help SSA identify the eligible
population for its outreach efforts, and millions who may be eligible
have not yet applied. SSA maintains that it would not be able to
establish specific goals and measures for its outreach activities, as
we recommended in our May 2007 report because, of the lack of reliable
data on the total eligible population. Responding to another of our
recommendations, SSA is working with the Internal Revenue Service to
determine if tax data can help target individuals eligible for the
subsidy. The Centers for Medicare & Medicaid Services and the
Congressional Budget Office have estimated, respectively, that about
2.6 million to over 4 million individuals who may qualify for the
subsidy are not receiving it. Various barriers, such as reluctance to
disclose personal financial information or lack of knowledge of the
subsidy, may prevent potentially eligible Medicare beneficiaries from
applying for the subsidy. To solicit applications from individuals
potentially eligible for the subsidy, SSA conducted an extensive
outreach campaign from May 2005 to August 2006, but has decreased its
outreach activities since then. Staffing constraints in SSA field
offices may also limit SSA‘s ability to assist individuals with the
subsidy and conduct local outreach to inform the public about the
subsidy.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-812T]. For more
information, contact Barbara Bovbjerg at 202-512-7215 or
bovbjergb@gao.gov.
[End of section]
May 22, 2007:
Mr. Chairman and Members of the Committee:
I appreciate the opportunity to participate in today's hearing to
discuss the Social Security Administration's (SSA) progress in
enrolling individuals in 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 of 2003 (MMA).[Footnote 1] MMA enabled Medicare
beneficiaries to enroll voluntarily in drug plans sponsored by private
health insurance companies. The benefit includes a low-income subsidy,
or "extra help," to assist Medicare beneficiaries with limited income
and resources (also called assets) in paying their premiums and other
out-of-pockets costs.
The Department of Health and Human Services and its Centers for
Medicare & Medicaid Services (CMS) are largely responsible for
implementing the new drug plan, called Medicare Part D, and SSA
administers the low-income subsidy. SSA is responsible for conducting
outreach efforts to identify and notify 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. My testimony will
address (1) the number of applicants approved for or denied the low-
income subsidy and (2) the challenges of identifying individuals
eligible for the subsidy and targeting outreach efforts.
My comments are based largely on a prior GAO report issued in May 2007
addressing SSA's implementation of the low-income subsidy and
associated spending.[Footnote 2] We updated selected aspects of the
work during May 2008. We conducted our work in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
Summary:
Of the 7.2 million applicants for the low-income subsidy, SSA approved
2.8 million of them, and SSA has improved some key measures for its
subsidy application processes. SSA approved about 570,000 applicants,
denied about 403,000 applicants, and determined that no decision was
required for about 281,000 applicants in fiscal year 2007. In a 2007
SSA study of low-income subsidy denials, SSA found that excess income
was the primary reason for 62 percent of applicant denials and about 24
percent of these denied applicants were within $1,500 of the income
limit. Excess resources were the primary reason for 16 percent of
applicant denials and nearly 30 percent of these denied applicants were
within $5,000 of the resource limit. Approximately 9 percent had both
excess income and resources. Further, SSA has collected key data and
established some goals to monitor its progress in implementing and
administering the subsidy benefit.
No reliable data are available to help SSA target its outreach efforts,
and millions who may be eligible for the subsidy have not yet applied.
SSA maintains that it is not able to establish specific goals and
measures for its outreach activities, as we recommended in our May 2007
report, because of the lack of reliable data on the total eligible
population. However, responding to another of our recommendations, SSA
is working with the Internal Revenue Service to determine whether tax
data can help to target individuals eligible for the subsidy. According
to CMS and Congressional Budget Office estimates, respectively, about
2.6 million to over 4 million individuals who may qualify for the
subsidy are not receiving it. Various barriers, such as a reluctance to
disclose personal financial information, and inadequate availability of
one-on-one assistance for completing the application, may prevent
potentially eligible Medicare beneficiaries from applying for the
subsidy. To solicit applications from individuals potentially eligible
for the subsidy, SSA conducted an extensive outreach campaign, from May
2005 to August 2006, but has decreased its outreach activities since
then due to limited funding. Staffing constraints in SSA field offices
may also limit SSA's ability to assist individuals with the subsidy and
conduct local outreach to inform the public about the subsidy.
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 3] Medicare beneficiaries who qualify for full coverage
under their state's Medicaid program,[Footnote 4] as well as Medicare
beneficiaries who qualify for more limited Medicaid coverage,
Supplemental Security Income (SSI), or state Medicare Savings Programs
are automatically enrolled in a Part D 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 2008, individuals qualify if they have
an income up to $15,600 for an individual and $21,000 for a couple and
if they have resources up to $11,990 for an individual or $23,970 for a
couple.[Footnote 6] The amount of the subsidy for premiums,
deductibles, copayments, and catastrophic coverage varies depending on
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. 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 special $500 million
appropriation from the Federal Hospital Insurance Trust Fund and the
Federal Supplementary Medical Insurance Trust Fund to assist SSA in
implementing its Part D 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. SSA informed us that the agency now has a mechanism to
track costs for low-income subsidy applications, and estimates that it
cost the agency $175 million to administer the subsidy in fiscal year
2007, and that it expects similar costs in fiscal year 2008.
SSA Continues to Approve Applications and Improve Processing Efforts
and Has Improved Some Measures for Processing Benefits:
SSA continues to approve low-income subsidy applications; of the
applicants who were denied benefits, most exceeded income limits and
others exceeded resource limits. To monitor its progress in
implementing and administering the subsidy benefit, SSA has collected
key data and established some goals.
Excess Income Was the Predominant Reason That Applicants Were Denied
the Subsidy in Fiscal Year 2007:
Of the approximately 7.2 million applicants filing for the subsidy as
of March 2008, SSA approved 2.8 million.[Footnote 7] SSA received 1.3
million new applications in fiscal year 2007, approving approximately
570,000 (43 percent), denying approximately 403,000 (31 percent), and
made no decision for approximately 281,000 (22 percent) because
applicants had submitted duplicate applications among other
reasons.[Footnote 8]
According to a recent SSA study of individuals who applied for the
subsidy in 2007 and where SSA made a decision by January 2008, SSA
denied approximately 416,000 applicants. The most common reasons for
denials were excessive income and resources.[Footnote 9] As Table 1
shows, excess income was the primary reason for denials, and excess
resources were the reason in approximately 17 percent of the denials.
Table 1: Reason for Denials for Individuals Who Applied in 2007, in
Percentages:
Application: Individual;
Income: 62.2%;
Resources: 20.2;
Both income and resources: 8.7;
Other reason[A]: 8.9;
Total: 100%;
Number of persons: 295,559.
Application: Couple;
Income: 61.5%;
Resources: 8.0;
Both income and resources: 10.9;
Other reason[A]: 19.7;
Total: 100%;
Number of persons: 120,934.
Application: All denied applicants;
Income: 62.0%;
Resources: 16.6;
Both income and resources: 9.4;
Other reason[A]: 12.1;
Total: 100%;
Number of persons: 416,493.
Source: Social Security Administration's analysis of Medicare Database,
February 1, 2008.
Totals may be greater than 100 percent due to rounding.
[A] This included applicants that were denied because they were not
Medicare beneficiaries, were not a U.S. resident, or because they
failed to provide SSA with documentation to complete its subsidy
determination.
[End of table]
For denials based on excess income, about 10 percent of applicants were
within $500 of the income limit. About 98 percent of applicants with
excess income received Social Security benefits, and 35 percent
received pensions from sources other than veterans' or Social Security
benefits. Table 2 shows the extent to which applicants were denied
subsidy eligibility because their income was too high. For those
denied, the median excess income was $4,572.
Table 2: Amount by Which Income Exceeded the Subsidy Limits when Income
Was a Reason for Denial, in Percentages of Persons Denied:
Excess annual income of denied applicants in 2007: $20,000 or more;
Single applicant: 7.5%;
Couple: 7.2%;
All: 7.3%.
Excess annual income of denied applicants in 2007: $15,000 to
