This is the accessible text file for GAO report number GAO-07-555 
entitled 'Medicare Part D Low-Income Subsidy: Additional Efforts Would 
Help Social Security Improve Outreach and Measure Program Effects' 
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Report to the Committee on Finance, U.S. Senate: 

United States Government Accountability Office: 

GAO: 

May 2007: 

Medicare Part D Low-Income Subsidy: 

Additional Efforts Would Help Social Security Improve Outreach and 
Measure Program Effects: 

GAO-07-555: 

GAO Highlights: 

Highlights of GAO-07-555, a report to the Committee on Finance, U.S. 
Senate 

Why GAO Did This Study: 

Congress passed the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), which created a Part D outpatient 
prescription drug benefit that enables Medicare beneficiaries to enroll 
in competing private drug coverage plans. The benefit also offers a 
subsidy administered by the Social Security Administration (SSA) to 
assist certain low-income Medicare beneficiaries with out-of-pocket 
costs. GAO was asked to review (1) SSA’s progress in identifying and 
soliciting applications from individuals potentially eligible for the 
subsidy; (2) SSA’s processes for making eligibility determinations, 
resolving appeals, and redetermining beneficiaries’ eligibility; and 
(3) how the subsidy has affected SSA’s workload and operations. To 
conduct this study, GAO reviewed the law, assessed subsidy data, and 
interviewed SSA and other officials. 

What GAO Found: 

SSA approved about 2.2 million Medicare beneficiaries for the low-
income subsidy as of March 2007, despite barriers it faced in 
identifying the eligible population and soliciting applications; 
however, measuring the success of SSA’s outreach efforts is difficult 
because there are no reliable data on the size of the eligible 
population. In 2005, SSA mailed 18.6 million subsidy applications to 
Medicare beneficiaries who were potentially eligible for the subsidy. 
SSA knew that this mailing was an overestimate, but took this approach 
to ensure that all who were eligible would be contacted. SSA had hoped 
to more specifically identify the eligible population using IRS tax 
data, but current law restricts the use of taxpayer data unless an 
individual has already applied for the subsidy. Further, SSA conducted 
a campaign of about 76,000 events held nationwide to educate people 
about the subsidy and how to apply for it. Since the initial campaign 
ended, however, SSA has not developed specific performance goals and 
measures to assess the progress of its continuing outreach efforts. 
SSA’s efforts to solicit applications were hindered by beneficiaries’ 
confusion about the difference between the subsidy and the Medicare 
Part D prescription drug plan, and the reluctance of some individuals 
to share personal financial information, among other factors. While the 
early subsidy participation rate compares favorably to those of some 
other low-income programs, the lack of reliable data on the size of the 
eligible population means that the extent to which SSA has signed up 
the eligible population for the benefit is unknown. While SSA has 
established processes for making subsidy eligibility determinations, 
resolving appeals, and conducting redeterminations, it has not 
established some key management tools to monitor the progress of all of 
its efforts, as specified in GAO’s internal control standards. For 
example, while SSA tracks various results from its appeals process, it 
does not currently have a performance goal to assess the timeliness of 
appeals decisions, but agency officials told us that SSA plans to 
establish a goal of processing 75 percent of appeals in 60 days. Also, 
while SSA tracks the status of its redetermination decisions, officials 
do not believe that it is necessary to measure the time for processing 
individual redetermination decisions because they said that the time to 
complete the overall redeterminations cycle provides adequate 
information. SSA’s implementation of the low-income subsidy did affect 
the agency’s workload and operations, but according to SSA officials, 
the additional workload has been manageable overall as a result of 
increased funding that the agency received to carry out MMA activities. 
SSA hired 2,200 field office staff, and 500 headquarters staff to 
handle its new subsidy workload, as well as to carry out other 
activities for the program. In 2006, SSA staff spent the equivalent of 
2,190 work years on low-income subsidy implementation activities, with 
about 50 percent of the time spent on subsidy applications. While there 
were periods of high subsidy application activity, SSA officials told 
us that subsidy program activities did not have an adverse impact on 
other SSA workloads. The officials attributed the minimal impact of 
Part D to several factors, including the highly automated subsidy 
application process and the $500 million congressional appropriation 
that SSA spent on MMA start-up costs. SSA estimates that its costs for 
low-income subsidy activities are $175 million annually. 

What GAO Recommends: 

GAO recommends that SSA develop specific performance goals and measures 
for its outreach activities, develop key management tools for its 
appeals and redetermination decisions, and also that SSA and the 
Internal Revenue Service (IRS) work together to assess the extent to 
which taxpayer data could help to better target individuals who might 
qualify for the subsidy. IRS generally agreed with our recommendation, 
and SSA generally agreed with all but one of our recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-555]. 

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 bovbjergbj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

SSA Has Made Progress in Approving Subsidy Applicants, despite Barriers 
That Hindered Its Outreach Efforts, but Measuring Its Success Is 
Difficult: 

SSA's Processes for Determining Applicants' Subsidy Eligibility, 
Resolving Appeals, and Redetermining Eligibility Lack Key Tools for 
Monitoring Performance: 

The Impact of the Subsidy Program Has Been Manageable: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Subsidy Application Mailings by State, May 27, 2005-August 
10, 2005: 

Appendix III: Comments from the Social Security Administration: 

Appendix IV: Comments from the Internal Revenue Service: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Part D Low-Income Subsidy Eligibility and Benefits, by 
Beneficiary Group, 2007: 

Table 2: Medicare Part D Low-Income Subsidy Estimates of the Eligible 
Population Who Must Apply to Receive the Subsidy: 

Table 3: SSA Appeals Workloads, August 2005-February 2007: 

Table 4: SSA's Outlays Covered by the Medicare Trust Funds, Fiscal 
Years 2003-2008: 

Figures: 

Figure 1: Flow of Low-Income Subsidy Information: 

Figure 2: Total Number of SSA Outreach Events from May 2005 to August 
2006: 

Figure 3: Cumulative Number of Subsidy Applicants and Approvals, 
November 2005 to December 2006: 

Figure 4: Reasons for Subsidy Denials Based on SSA's Sampling of Denied 
Claims: 

Abbreviations: 

CMS: Centers for Medicare and Medicaid Services: 
FP: federal poverty level: 
HHS: Department of Health and Human Services: 
IRS: Internal Revenue Service: 
MMA: Medicare Prescription Drug, Improvement, and Modernization Act of 
2003: 
PDP: prescription drug plan: 
SSA: Social Security Administration: 
SSI: Supplemental Security Income: 

United States Government Accountability Office: 
Washington, DC 20548: 

May 31, 2007: 

The Honorable Max Baucus: 
Chairman: 
The Honorable Charles E. Grassley: 
Ranking Member: 
Committee on Finance: 
United States Senate: 

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. 
According to recent studies, 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, which created a voluntary outpatient prescription drug benefit 
(Medicare Part D).[Footnote 1] The benefit, which became available in 
January 2006, enables Medicare beneficiaries to enroll in drug plans 
sponsored by private companies. A key element of the prescription drug 
benefit is the low-income subsidy, or "extra help," available to 
Medicare beneficiaries with limited incomes and resources to assist 
them in paying their premiums and other out-of-pockets costs. 

While the MMA assigned the majority of the responsibilities for 
implementing Medicare Part D prescription drug program to the 
Department of Health and Human Services and its Centers for Medicare 
and Medicaid Services (CMS), it charged the Social Security 
Administration (SSA) with administering the low-income subsidy. In this 
capacity, SSA is responsible for conducting outreach efforts to 
identify and notify individuals of the availability of the subsidy, 
making subsidy eligibility determinations, resolving appeals, and 
conducting redeterminations of beneficiaries' continued subsidy 
eligibility. SSA is also responsible for withholding Part D premiums 
from monthly Social Security benefits for beneficiaries who select this 
option. 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; (2) the processes that SSA uses to 
make eligibility determinations, resolve appeals, and conduct 
redeterminations for the subsidy; and (3) the impact that the subsidy 
had on SSA's workload and other operations. 

To conduct our work, we interviewed and obtained documentation from SSA 
headquarters officials responsible for implementing the low-income 
subsidy. We also obtained and discussed relevant documentation on SSA's 
outreach strategy, efforts to target outreach for the low-income 
population, and methods for obtaining input from state Medicaid 
agencies in Colorado, Kansas, Pennsylvania, Texas, and Utah. We 
interviewed officials in the Colorado, Kansas, Pennsylvania, and Utah 
state Medicaid agencies because they had established processes to make 
low-income subsidy determinations. We visited the Texas state Medicaid 
agency to gain the perspective of a state that had not yet set up such 
a process, but had plans to so in the future. We reviewed available 
documentation on SSA's processes for making eligibility determinations, 
resolving appeals, and making redeterminations. While we were generally 
able to verify some data on the processing time for eligibility 
determinations, based on electronic data provided to us, we did not 
have all the information needed to verify the validity of other data. 
We also interviewed SSA management and staff in eight SSA field offices 
in Maryland, Virginia, Pennsylvania, and Texas to obtain their views on 
the implementation, as well as client feedback they received regarding 
the subsidy application process. We selected SSA offices in those 
states because of the large number of subsidy applications that had 
been mailed to individuals potentially eligible for the subsidy. We 
visited SSA offices in Pennsylvania and Texas in particular because 
counties in these states had the most applicants for the subsidy as of 
June 2006. We interviewed CMS officials and obtained available 
documentation on the agency's involvement with SSA's outreach efforts. 
We also interviewed officials at the Internal Revenue Service (IRS) 
concerning legal restrictions on its ability to release tax data to SSA 
for the purposes of determining the population eligible for the subsidy 
and their concerns if these restrictions were lifted. We also 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. In addition, we interviewed officials in the 
five state Medicaid offices discussed earlier and two state health 
insurance programs (Pennsylvania and Texas) to obtain information on 
their efforts in assisting clients in applying for the subsidy and 
their perspectives on SSA's implementation efforts. We conducted our 
work from May 2006 through April 2007 in accordance with generally 
accepted government auditing standards. Appendix I provides a more 
detailed description of our scope and methodology. 

Results in Brief: 

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 on the eligible 
population. Because of the lack of reliable data on the eligible 
population, SSA identified 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 to ensure that everyone 
who might qualify for the subsidy was notified of the benefit and had 
an opportunity to apply for it. SSA developed the 18.6 million estimate 
by using its benefit records and data from other government sources. 
SSA officials had hoped to use Internal Revenue Service (IRS) tax data 
to identify the eligible population, but the law prohibits the use of 
the data unless an individual has already applied for the subsidy. SSA 
followed this mailing with phone calls and additional targeted 
mailings. Further, SSA conducted an outreach campaign of 76,000 events 
held nationwide. Since the initial campaign ended, however, SSA has not 
developed specific performance goals and measures to assess the 
progress of its outreach efforts. Besides being hindered by barriers to 
identifying individuals potentially eligible for the subsidy, SSA's 
solicitation efforts were hindered by beneficiaries' confusion about 
the difference between the subsidy and the Medicare Part D prescription 
drug plan, and the reluctance of some individuals to share personal 
financial information, among other factors. The early subsidy 
participation rate compares favorably to those of some other low-income 
programs, but the extent to which SSA has been successful in signing up 
the eligible population is unknown because there are no reliable data 
on the size of the target population. 

SSA has established application processes for determining low-income 
subsidy eligibility, reviewing appeals and conducting redeterminations; 
however, it has not established some key management tools to monitor 
the progress of all of its efforts. GAO internal controls standards 
state that establishing performance measures that compare actual 
performance against expected goals is needed to monitor the 
effectiveness of a program. To assess its low-income subsidy 
eligibility process, SSA has tracked the progress of the approximately 
6.2 million subsidy determinations since it began processing 
applications in July 2005, but did not have goals for measuring the 
processing time for these applications until March 2007. SSA's goal is 
now to process 75 percent of the subsidy applications in 60 days. In 
three separate studies since October 2005, SSA has sampled 10 percent 
of its appeals to determine the reasons for them. SSA has also tracked 
the amount of time for resolving appeals since August 2005. SSA data 
showed that in July 2006, the agency took 91 days to decide 1,795 
appeals, while in February 2007, SSA took 42 days to decide 2,463 
appeals. Although SSA tracks processing time for appeals, it currently 
has no performance goal to assess the timeliness of appeals decisions, 
and lacks the capability to report the information. Agency officials 
told us, however, that SSA plans to establish a goal of processing 75 
percent of appeals in 60 days--similar to its goal for processing 
subsidy applications--but will have to modify its system to produce 
performance information. Further, while SSA tracked the status of 1.2 
million redeterminations of subsidy eligibility, SSA does not measure 
the amount of time it takes to process individual redetermination 
decisions and has no plans to develop such information because 
officials stated that measuring the time for completing the overall 
redeterminations cycle provides adequate information. 

SSA's implementation of the low-income subsidy did affect the agency's 
workload and operations, but according to SSA officials, the additional 
work has been manageable overall because of the increased funding the 
agency received to carry out MMA start-up activities and other factors. 
SSA hired 2,200 field office staff and 500 headquarters staff to handle 
the new subsidy workload, as well as to carry out other activities for 
the program. In 2006, SSA staff spent the equivalent of 2,190 work 
years on the low-income subsidy activities, with about 50 percent of 
the time spent on subsidy applications. SSA currently estimates the 
amount of time that staff spend on low-income subsidy activities 
through periodic sampling. However, SSA is working to implement a new 
tracking mechanism by 2010 to more accurately capture all program data, 
including data related to the MMA. While there were periods of high 
subsidy application activity, SSA officials told us that subsidy 
program activities did not have an adverse impact on other SSA 
workloads. For example, in fiscal years 2005 and 2006, SSA exceeded its 
goal of making timely payments on initial retirement and survivor 
claims. The officials attributed the minimal impact of Part D to 
several factors, including the highly automated subsidy application 
process and the $500 million congressional appropriation that SSA spent 
on MMA start-up costs. SSA estimates that its costs for low-income 
subsidy activities are $175 million annually. 

This report contains recommendations to the SSA Commissioner that are 
intended to help the agency better assess its subsidy outreach efforts, 
and the results of its appeals and redetermination processes. The 
report also contains a recommendation to the Commissioners of SSA and 
IRS for the agencies to work together to assess the extent to which IRS 
data could help SSA to better target individuals who might qualify for 
the subsidy, and to develop more precise estimates of the eligible 
population. In its comments on a draft of this report, SSA generally 
agreed with our recommendation to develop a comprehensive plan with 
specific goals and measures to direct and monitor the performance of 
its outreach efforts. In its comments and a follow-up discussion, SSA 
officials told us that they believed that the agency's National 
Strategic Communications Plan served as a comprehensive plan for its 
outreach strategy, and shared their concerns about setting specific 
goals and measures for outreach efforts in the absence of reliable data 
on the population of individuals who might qualify for the subsidy. SSA 
disagreed with our recommendation to begin collecting data on the 
processing time for individual redetermination decisions, and establish 
performance goals for assessing the timeliness of individual 
redetermination and appeals decisions, and explained the basis for its 
position. SSA and IRS agreed with our recommendation that the two 
agencies work together to assess the extent to which IRS tax data may 
help SSA to better identify individuals who might qualify for the 
subsidy. However, IRS pointed out various limitations that might affect 
the usefulness of the data, and stated that its data can only help SSA 
to better target the individuals who may qualify for the subsidy. See 
appendix III for a copy of SSA's comments, and appendix IV for a copy 
of IRS's comments. SSA and IRS also provided a number of technical 
comments, which we incorporated as appropriate. 

Background: 

The enactment of the MMA in December 2003 added a voluntary outpatient 
prescription drug benefit to the Medicare program, known as Medicare 
Part D.[Footnote 2] Prior to this, the Medicare program did not 
generally pay for outpatient drugs. The new Medicare Part D drug 
benefit, which became available in January 2006, enables Medicare 
beneficiaries to select among private drug plans sponsored by private 
companies. Beneficiaries who elect to enroll in a Part D plan are 
responsible for a monthly premium, which varies by the individual plan 
selected. A key element of the prescription drug benefit is the low- 
income subsidy, or "extra help," available to low-income elderly and 
disabled individuals to assist them in paying their premiums, 
deductibles, and co-payments. Without the subsidy, individuals enrolled 
in Part D would have to pay greater out-of-pocket costs for their 
prescription medications. 

While the Department of Health and Human Services' CMS has 
responsibility for implementing the Part D prescription drug benefit, 
SSA is responsible for administering the subsidy.[Footnote 3] The MMA 
requires that SSA solicit and process subsidy applications to determine 
applicants' eligibility, resolve appeals for applicants dissatisfied 
with their subsidy determinations, and periodically redetermine 
individuals' continued eligibility. SSA transmits information on its 
approved subsidy determinations and individuals' subsidy levels to CMS, 
which in turn transmits the information to the appropriate drug plan. 
CMS provides information to SSA and to prescription drug plans for 
individuals who automatically qualify for the subsidy and the Part D 
prescription drug benefit, based on information it receives from state 
Medicaid agencies on individuals' eligibility for Medicaid and from SSA 
on individuals who receive Supplemental Security Income (SSI). SSA also 
withholds premium payments from the monthly Social Security checks of 
individuals who elect this payment option; otherwise, individuals make 
direct payments to their selected prescription drug plan. Figure 1 
shows the flow of information among SSA, CMS, state Medicaid agencies, 
prescription drug plans, pharmacies, and beneficiaries. 

Figure 1: Flow of Low-Income Subsidy Information: 

[See PDF for image] 

Source: GAO analysis of SSA data; images (Art Explosion). 

[End of figure] 

To implement the new responsibilities under the MMA, SSA established a 
Medicare Planning and Implementation Task Force in December 2003. The 
objectives of the task force included determining the affected 
population; the number of staff, locations, and material resources 
needed; and agreeing on specific responsibilities with other federal 
government agencies. 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 for fiscal years 
2004 and 2005, but later extended the appropriation to fiscal year 
2006. The appropriation was exhausted in fiscal year 2006, and MMA 
spending is now subject to SSA's overall spending ceiling under the 
Limitation on Administrative Expenses appropriation. 

Eligibility for the Medicare Part D Low-Income Subsidy: 

All Medicare beneficiaries entitled to benefits under Medicare Part A 
or enrolled in Part B are eligible to enroll in Medicare Part 
D.[Footnote 4] Some Medicare beneficiaries automatically qualify for 
the low-income subsidy, while others are required to apply for it and 
must meet the eligibility requirements established under the MMA. Those 
eligible for the subsidy generally fall into three broad categories 
(table 1 describes the Part D low-income subsidy associated with each 
category, as well as the costs for Medicare beneficiaries who do not 
qualify for the subsidy). 

* Full-benefit dual eligibles: These are low-income Medicare 
beneficiaries who qualify for full coverage under their state's 
Medicaid program,[Footnote 5] which, prior to the effective date of 
Part D, provided coverage for their outpatient prescription drug costs. 
These individuals are automatically enrolled by CMS in the Part D 
prescription drug program. They automatically qualify for the full 
subsidy and do not need to file an application. These beneficiaries are 
referred to as "deemed." 

* Partial-benefit dual eligibles: These are Medicare beneficiaries who 
qualify for more limited Medicaid coverage, SSI, or state Medicare 
Savings Programs.[Footnote 6] Similar to full-benefit dual eligibles, 
they are automatically enrolled in a Part D prescription drug plan by 
CMS. They also automatically qualify for the full subsidy and do not 
need to file an application. They are also referred to as "deemed." 

˛ Other Medicare beneficiaries: Medicare beneficiaries who are not 
deemed eligible must apply and meet the income and resource 
requirements to receive the subsidy. These beneficiaries generally 
qualify if they have incomes below 150 percent of the federal poverty 
level and have limited resources.[Footnote 7] In addition to applying 
for the subsidy, these individuals must also apply to enroll in the 
Part D prescription drug plan. Low-income subsidy benefits are provided 
to these individuals on a sliding scale, depending on their income and 
resources. 

Table 1: Part D Low-Income Subsidy Eligibility and Benefits, by 
Beneficiary Group, 2007: 

Type of beneficiary: Full-benefit dual eligibles[C, D]; 
Income[A]: At or below 100 percent of the federal poverty level, (FPL) 
(at or below $10,210 for individuals or $13,690 for couples); 
Resources[B]: Not applicable[E]; 
Monthly premium and annual deductible: 0 premium and 0 deductible; 
Co-pay: $1/generic and $3.10/brand name drug; no co-pay after $3,850 in 
annual out-of-pocket drug spending; no co-pay if institutionalized. 

Type of beneficiary: Full-benefit dual eligibles[C, D]; 
Income[A]: Above 100 percent of FPL (above $10,210 for individuals or 
above $13,690 for couples); 
Resources[B]: Not applicable[E]; 
Monthly premium and annual deductible: 0 premium and 0 deductible; 
Co-pay: $2.15/generic and $5.35/brand name drug; no co-pay after $3,850 
in annual out-of-pocket drug spending; no co-pay if institutionalized. 

Type of beneficiary: Partial-benefit dual eligibles[F] (participants in 
a Medicare Savings Program or Supplemental Security Income (SSI) 
beneficiaries[D]); 
Income[A]: Varies according to type of beneficiary. For Medicare 
Savings Program and SSI beneficiaries, income levels are set by income 
eligibility requirements for those programs; 
Resources[B]: Not applicable[E]; 
Monthly premium and annual deductible: 0 premium and 0 deductible; 
Co-pay: $2.15/generic and $5.35/brand name drug; no co-pay after $3,850 
in annual out-of-pocket drug spending. 

Type of beneficiary: Other subsidy-eligible beneficiaries; 
Income[A]: Below 135 percent of FPL (less than $13,784 for individuals 
or $18,482 for couples); 
Resources[B]: Below $7,620 for individuals or $12,190 for couples; 
Monthly premium and annual deductible: 0 premium and 0 deductible; 
Co-pay: $2.15/generic and $5.35/brand name drug; no co-pay after $3,850 
in annual out-of-pocket drug spending. 

Type of beneficiary: Other subsidy-eligible beneficiaries; 
Income[A]: Below 135 percent of FPL (less than $13,784 for individuals 
or $18,482 for couples); 
Resources[B]: Between $7,620 and $11,710 for individuals, or between 
$12,190 and $23,410 for couples; 
Monthly premium and annual deductible: 0 premium and $53 deductible; 
Co-pay: 15 percent co-pay between $54 and $3,850 in annual out of 
pocket spending; $2.15/generic and $5.35/brand name drug after $3,850 
in annual out-of-pocket drug spending. 

Type of beneficiary: Other subsidy-eligible beneficiaries; 
Income[A]: Between 135 and 149 percent of FPL (between $13,784 and 
$15,315 for individuals or between $18,482 and $20,535 for couples); 
Resources[B]: Below $11,710 for individuals or $23,410 for couples; 
Monthly premium and annual deductible: Sliding scale premium based on 
income and $53 deductible;
Co-pay: 15 percent co-pay between $54 and $3,850 in annual out-of-
pocket spending; $2.15/generic and $5.35/brand name drug after $3,850 
in annual out-of pocket drug spending. 

Type of beneficiary: Medicare beneficiaries who are not eligible for 
the subsidy[G]; 
Income[A]: 150 percent of FPL or more (above $15,315 for individuals or 
above $20,535 for couples); 
Resources[B]: $11,710 or more for individuals or $23,410 or more for 
couples; 
Monthly premium and annual deductible: Variable premium, based on plan 
chosen, an average of $32 per month; $265 deductible; 
Co-pay: 25 percent co-pay between $266 and $2,400 in annual out-of-
pocket spending; no benefit between $2,400 and $3,850; 5 percent 
coinsurance or $2.15/generic and $5.35/brand name drug after $3,850 in 
annual out-of-pocket drug spending[H]. 

Source: GAO analysis of the MMA, as well as CMS and SSA regulations and 
guidance. 

[A] The income limits shown above are those that apply to individuals 
with no dependents. If household members rely on the Medicare 
beneficiary or the spouse of the beneficiary for support, SSA uses the 
federal poverty levels based on household size. Also, if an applicant 
lives in Alaska or Hawaii, SSA applies the slightly higher poverty 
levels applicable to those states. 

[B] These resource limits include $1,500 per person burial expenses for 
the individual and the spouse if there is one, and they live together. 

[C] These individuals receive full Medicaid benefits. For all 
beneficiaries eligible for the full subsidy, premiums are 0 for those 
prescription drug plans that offer basic coverage at or below the 
standard Part D premium. Beneficiaries may be eligible for the full 
subsidy amount, but still pay some portion of their premium if they 
enroll in a plan whose premium is above the appropriate threshold. In 
2007 the National Average Part D Benchmark Premium is $27.35. 

[D] Both of these groups are deemed eligible for the subsidy and are 
automatically signed up for it. Persons in the "other subsidy-eligible 
beneficiaries" group must apply to receive the subsidy. 

[E] The MMA does not impose a resource test when determining whether 
individuals in these deemed groups qualify for the low-income subsidy. 
These beneficiaries, however, may be subject to a resource test in 
order to qualify for Medicaid or other benefit programs. 

[F] Medicare Savings Program participants include Qualified Medicare 
Beneficiaries, Specified Low-Income Medicare Beneficiaries, and 
Qualifying Individuals. 

[G] This group includes all nondeemed individuals who do not meet 
either the income or resource test, or both. 

[H] This is the standard benefit package under Part D. Actual cost- 
sharing arrangements may vary by plan. 

[End of table] 

When Part D became available in January 2006, the prescription drug 
coverage provided under Medicaid for the estimated 6.2 million dual 
eligibles was transferred to Medicare Part D. To ensure that these 
individuals did not have a lapse in their drug coverage when the Part D 
benefit took effect in January 2006, CMS automatically enrolled them in 
a randomly selected Part D drug plan that was within established low- 
income subsidy benchmarks. [Footnote 8] For the initial enrollment 
period, CMS also automatically enrolled beneficiaries who were 
identified as eligible for the low-income subsidy, but had not selected 
a prescription drug plan by the May 15, 2006, deadline.[Footnote 9] In 
January 2007, approximately 630,000 dual eligibles, who were 
automatically receiving the subsidy in 2006, lost their deemed status. 
These were people who lost their Medicaid, Medicare Savings Plan, or 
SSI coverage at some point during the year. To continue their subsidy 
eligibility, these individuals needed to apply for the subsidy or 
regain their deemed status. According to SSA, by mid-March 2007, 
approximately 100,000 of these beneficiaries had applied and been 
approved for the subsidy. 

Applying for the Subsidy: 

Medicare beneficiaries who do not automatically qualify for the Part D 
low-income subsidy can apply for the benefit directly through SSA or 
through their state Medicaid office. Individuals 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. On the basis of applicant's 
income and resource information, SSA issues a letter to inform the 
applicant of whether or not he or she has been approved for the 
subsidy. SSA sends a predecisional notice to applicants who appear to 
be ineligible for the subsidy based on the income and resource 
information they provided, and allows them 20 days to provide other 
information for the agency to consider. If applicants do not provide 
such information within the required time frame, SSA sends a final 
letter to inform them that they do not qualify for the subsidy. If an 
individual applies for the subsidy through SSA, SSA is responsible for 
resolving any subsequent appeals, and for redetermining the applicant's 
continued subsidy eligibility. 

As required by the MMA, beneficiaries may also apply for the subsidy 
through their state Medicaid office. However, according to state 
Medicaid officials we spoke with, they have encouraged beneficiaries to 
apply for the subsidy through SSA whenever possible. To prepare for 
those beneficiaries that request to have their subsidy applications 
processed by a state office, state Medicaid officials we spoke to said 
that they modified their Medicare Savings Program or Medicaid 
applications, when appropriate, to collect the necessary information 
for subsidy determinations. As of March 2007, only the Colorado and 
Kansas state Medicaid agencies have made Part D subsidy determinations. 
When state Medicaid agencies make subsidy determinations for 
individuals, they are also responsible for subsequent appeals and 
redetermination decisions. 

SSA Has Made Progress in Approving Subsidy Applicants, despite Barriers 
That Hindered Its Outreach Efforts, but Measuring Its Success Is 
Difficult: 

SSA approved 2.2 million subsidy applicants as of March 2007, despite 
factors that limited its efforts to identify the eligible population 
and solicit applications; however, measuring the success of its efforts 
is difficult because there are no reliable data on the size of the 
eligible population. To compensate for the lack of reliable data on the 
eligible population, SSA used data from a variety of federal sources to 
initially target its outreach effort to approximately 18.6 million 
potentially eligible Medicare beneficiaries, which it believed to be an 
overestimate of the potentially eligible population. To solicit 
applications from the approximately 18.6 million Medicare 
beneficiaries, SSA launched an outreach effort that included mass 
mailings and a public campaign of over 76,000 events held nationwide. 
Though individuals' reluctance to share personal financial information 
and other factors that initially hindered SSA's solicitation efforts 
have lessened, various advocacy groups are concerned that eligibility 
requirements and a complicated application may discourage potential 
applicants. While advocacy group and state Medicaid agency officials we 
interviewed believe that SSA has made some contact with all Medicare 
beneficiaries eligible for the subsidy, they say that more personalized 
assistance, such as door to door contact, is needed. While SSA provides 
various personalized services to assist individuals in completing their 
subsidy applications, agency officials told us that SSA does not have 
the resources to go door to door to make contacts. We found that the 
subsidy program's participation rate compares favorably to those of 
other low-income programs at similar stages of implementation. However, 
because no reliable data exist on the population of potential 
eligibles, it is unclear how effective SSA's outreach efforts have 
been. 

SSA Approved 2.2 Million Subsidy Applicants, despite Barriers Limiting 
Its Ability to Identify the Eligible Population and Solicit 
Applications: 

Although SSA faced barriers in identifying the population eligible for 
the subsidy and soliciting applications from individuals, it had 
approved 2.2 million subsidy applicants as of March 2007. SSA conducted 
its initial outreach campaign from May 2005 to August 2006 to educate 
individuals about the subsidy and to help them apply for it. SSA 
officials told us that their outreach goals were to (1) ensure that as 
many individuals potentially eligible for the subsidy were informed of 
the benefit, (2) ensure that all potentially eligible Medicare 
beneficiaries had an opportunity to apply for the benefit, and (3) 
solicit 5 million subsidy applications over fiscal years 2005 and 2006 
(SSA actually received 5.5 million applications during this time 
period). To accomplish these goals, SSA launched an outreach campaign 
that included over 76,000 events conducted in collaboration with 
various federal, state, and local partners, such as state Medicaid 
agencies, state health insurance programs, and various advocacy groups 
for Medicare beneficiaries. SSA carried out the campaign by requiring 
each of its field offices to conduct a certain number of outreach 
events. These events were held at senior citizen centers, public 
housing authorities, churches, pharmacies, and other venues. As figure 
2 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 2: 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 SSA's initial outreach campaign has ended, SSA is continuing 
to conduct outreach efforts to solicit applications from individuals 
potentially eligible for the subsidy. For example, SSA has conducted 
various activities to increase subsidy applications from individuals in 
rural and homeless communities. SSA also recently launched a new 
strategy during the week of Mother's Day to inform relatives and 
caregivers about the subsidy, and is planning a similar effort during 
Father's Day. Additionally, SSA is targeting approximately 630,000 dual 
eligibles who lost their automatic eligibility for the subsidy to help 
them apply for the subsidy. While SSA has incorporated its strategy for 
continuing subsidy outreach efforts into its National Strategic 
Communications Plan, the plan does not contain specific performance 
goals and measures. As a result, SSA has no basis for assessing its 
progress and identifying areas that require improvement. 

Barriers That Limited SSA's Efforts in Identifying the Eligible 
Population: 

SSA initially targeted 18.6 million individuals who might be eligible 
for the subsidy, which was an overestimate of the eligible population. 
SSA took this approach because there were no reliable data on the size 
of the eligible population. SSA developed the targeted population to 
which to mail the subsidy applications by screening out Medicare 
beneficiaries whose income made them ineligible for the Part D subsidy 
using income data from its benefit records, as well as income 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 (HHS). SSA 
realized that using these data sources would result in an overestimate 
of the number of individuals who might qualify for the subsidy. While 
the data provided information on individuals' income, it provided 
limited information on individuals' assets or nonwage income, which is 
needed to determine eligibility for the subsidy. Because of the lack of 
such information, SSA proceeded with a more generalized targeting of 
Medicare beneficiaries to ensure that all individuals who were 
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 
more likely to be eligible for the subsidy by using tax data from IRS 
on individuals' wage, interest, and pension income, which would be 
needed to determine individuals' level of income and assets. Without 
such data, SSA can neither estimate how many individuals might qualify 
for the subsidy nor identify individuals to target for more direct 
outreach. The officials said that their prior experience with other low-
income-based programs had shown that more targeted outreach efforts 
helped to elicit a higher response rate. Current law permits SSA to 
obtain income and asset data from IRS to assist in verifying income and 
asset data provided by individuals who have applied for the 
subsidy.[Footnote 10] However, to protect the privacy of taxpayer 
information and enhance tax compliance, the law prohibits disclosures 
of such information to identify individuals who may be eligible for the 
subsidy, but have not applied. 

In a November 2006 report, 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 11] While SSA uses 
various sources of information to identify individuals' income, it does 
not have access to income data that could assist in imputing an 
individual's level of assets, which it believes could be provided 
through IRS income tax data. SSA estimates individuals' assets because 
IRS income tax return and other tax data do not contain asset 
information. However, IRS officials told us that its data have many 
limitations that could affect their usefulness. For example, IRS 
officials said that they have limited data on assets 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 asset level. Also, the officials said that many people with 
low incomes are not required to file taxes, and therefore IRS would 
have only limited information on them.[Footnote 12] IRS officials also 
explained that tax data could most likely identify individuals who 
would not qualify for the subsidy, rather than those who would. 
Conversely, the officials stated that tax data might incorrectly 
eliminate some people who might qualify for the subsidy, which could 
result in SSA not contacting them. Moreover, the IRS officials said 
that the data it provides to SSA to determine eligibility could be 
almost 2 years old and may not reflect an individual's current income. 
For example, for subsidy applications in 2007, the last full year of 
tax data the IRS could provide would be for 2005. Given these various 
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. Despite IRS's position on the limitations of 
its data on low-income taxpayers, SSA officials believe that IRS data 
can still help to better target the eligible population. However, no 
effort has been undertaken to determine the extent to which IRS income 
data could benefit SSA in this effort, 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. 

Barriers That Limited SSA's Solicitation Efforts: 

Although SSA has approved 2.2 million applicants for the subsidy, it 
initially faced difficulties in soliciting applications. To solicit 
applications, SSA sent its first targeted mailing to the 18.6 million 
potentially eligible individuals between May and August 2005. The 
mailings included an application for the subsidy and instructions on 
how to apply. SSA worked with various focus groups to develop the 
application, which included questions about applicants' income and 
resources, the value of life insurance policies, and household size. 
Appendix II provides the total number of subsidy applications mailed by 
state. 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, and SSA made 400,000 follow-up calls to the 
beneficiaries who requested SSA assistance. SSA also conducted other 
follow-up efforts, including sending follow-up 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 over 79 years of age living 
in high-poverty areas; and individuals in Spanish-speaking, Asian- 
American, and African-American households. In addition, SSA called over 
300,000 Medicare beneficiaries who had not applied, but had previously 
qualified for a temporary Medicare drug discount card, and included 
information about the subsidy in its 2005 and 2006 annual cost of 
living adjustment notices to Social Security beneficiaries and its 
annual Medicare Savings Program outreach letters. 

SSA's efforts to solicit applications were hindered by various factors, 
including individuals' confusion over the difference between the 
prescription drug program and the subsidy, the reluctance of some 
individuals to share personal financial information, and eligibility 
requirements, among other factors. According to SSA field office staff 
and state Medicaid and advocacy group officials, many individuals were 
confused about the difference between the prescription drug program and 
the subsidy, and did not understand that they involved separate 
application processes, although the subsidy application and the 
decision letters explained that Part D enrollment was a separate 
process. Consequently, some individuals thought that once they were 
approved for the subsidy, they were automatically enrolled in a 
prescription drug plan and vice versa to a lesser extent. SSA field 
office staff and advocacy group officials also told us 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 13] Though the impact of these 
factors has lessened as individuals have become more educated about the 
subsidy, concerns remain about eligibility requirements and the overall 
complexity of the application. For example, SSA field office staff and 
advocacy group officials 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 to allow more beneficiaries to qualify 
for the subsidy. Advocacy group officials 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 that they have revised 
the subsidy 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 because of 
the Lack of Reliable Data on the Eligible Population: 

Although the low-income subsidy participation rate compares somewhat 
favorably to those of some low-income programs during similar stages of 
implementation, 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 between 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, there are between about 3.4 million to 4.7 
million individuals who are eligible for the subsidy, but have not yet 
applied (See table 2). In developing these estimates, however, these 
entities faced the same data limitations as SSA in identifying 
potentially eligible individuals. 

Table 2: 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 approved[A](Column A): 6.6; 
SSA subsidy approvals as of as of March 2007 (and estimated 
participation rate) Column B): 2.2 (33%); 
Eligible but have not yet applied (Column A minus B): 4.4. 

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

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

Source of estimate: Centers for Medicare and Medicaid Services[E]; 
Eligible but not automatically approved[A](Column A): 5.6; 
SSA subsidy approvals as of as of March 2007 (and estimated 
participation rate) Column B): 2.2 (39%); 
Eligible but have not yet applied (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, 
Washington, D.C.: July 2004. The data were projected for calendar year 
2006. 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), 
Washington, D.C: 2005. The Coalition estimated that an overall total of 
14.4 million beneficiaries would be eligible for the subsidy in 2006. 

[D] T. Rice and K. Desmond, 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. The authors estimated that a 
total of approximately 6.9 million eligible individuals would not be 
deemed, 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, " Washington, D.C: January 30, 2007. CMS 
estimated that an overall total of 13.2 million beneficiaries would be 
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 these estimates, given 
the limitations in identifying the size of the eligible population. SSA 
officials stated that the program has been successful in meeting its 
internal outreach goals. The advocacy group officials we interviewed 
agreed that SSA has informed all Medicare beneficiaries of the benefit 
and provided them with the opportunity to apply, but advocates 
questioned the effectiveness of SSA's outreach methods because of the 
lack of personal assistance available for elderly and disabled 
individuals who may not be connected to a social service organization 
and may not be able to go into an SSA field office. Advocacy groups 
believe that a more personalized outreach approach, such as door-to- 
door contact, is needed to encourage these individuals to apply for the 
subsidy. However, SSA officials also stated that door-to-door contact 
with individuals would be a resource intensive and costly endeavor for 
the agency. 

After over 2 years of implementation efforts, however, SSA's estimated 
participation rate of 32 to 39 percent of individuals who were not 
automatically deemed eligible for the subsidy compares favorably to 
those of some other low-income programs at a similar stage of 
implementation. SSA's participation rate is around 68 to 74 percent 
when the deemed population is included. However, we focused on the 
participation rate of the nondeemed population, because this is the 
population of individuals who had to sign up for the subsidy and to 
whom SSA targeted its outreach efforts. After its second year of 
national implementation in 1976, the Food Stamp Program had an 
estimated participation rate of 31 percent. During its second year of 
implementation in 1975, the SSI program had an estimated participation 
rate of 50 percent for those 65 or older. According to SSA officials, 
two-thirds of the early elderly participants were automatically 
transferred from state government programs to SSI (these individuals 
are similar to those deemed eligible for the Part D low-income 
subsidy). In both instances, the low-income subsidy participation rate 
compares favorably. 

SSA's Processes for Determining Applicants' Subsidy Eligibility, 
Resolving Appeals, and Redetermining Eligibility Lack Key Tools for 
Monitoring Performance: 

SSA has established subsidy application processes for determining 
applicants' subsidy eligibility, resolving appeals, and redetermining 
subsidy eligibility, but has not established some key tools needed to 
monitor the performance of all of its processes. For example, while SSA 
tracks various information from its subsidy application processes 
through its Medicare database and other means, it does not track 
information on processing times for redeterminations, and does not 
currently have performance goals to monitor the timeliness of appeals 
and individual redetermination decisions. 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 14] Accordingly, agencies should compare 
actual performance data against expected goals and analyze the 
differences. 

Eligibility Determinations: 

To determine individuals' eligibility for the subsidy, SSA largely 
relies on an automated process. After an individual applies, 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. In cases where there 
are conflicting data or questions regarding the data, SSA field office 
staff follow up with individuals to address such matters. SSA tracks 
the number of eligibility determinations it makes, the outcome of those 
determinations, and the length of time for completing the 
determinations. SSA also tracks data on denials, and periodically 
conducts samples to examine the reasons for such actions. Although the 
subsidy did not become available until January 2006, SSA began 
processing applications in July 2005 to encourage people to take 
advantage of the benefit when it became available. 

As of March 2007, approximately 6.2 million individuals had applied for 
the subsidy. SSA officials noted that the heaviest volumes occurred 
when the public outreach campaign was most active. Figure 3 provides 
data on the cumulative number of subsidy applicants and approvals from 
November 2005, when SSA began tracking the data, to December 2006. 

Figure 3: 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] 

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, 
determined that no decision was required for 1.4 million, and had 
decisions pending for 80,000 applicants. According to SSA officials, 
those requiring no decision were the result of duplicate applications, 
applications from individuals automatically qualified for the subsidy, 
or canceled applications.[Footnote 15] To identify reasons for subsidy 
denials, SSA conducted three separate studies that sampled a total of 
1,326 denied claims. These studies showed that most of applicants were 
denied due to resources or income that exceeded allowable limits set by 
the MMA (fig. 4). SSA officials stated that they plan to conduct a 
longitudinal study to examine the reasons for all cases in which 
applicants were denied the subsidy. 

Figure 4: Reasons for Subsidy Denials Based on SSA's Sampling of Denied 
Claims: 

[See PDF for image] 

Source: GAO analysis of SSA data. 

[End of figure] 

While SSA has captured data on the length of time it takes to make 
eligibility determinations since it began accepting applications for 
the subsidy in July 2005, it did not develop the capability to report 
the data, and did not establish a performance goal for processing times 
until March 2007. As a result, SSA did not have the management 
information that it needed to monitor its performance in this area and 
identify areas where improvements were needed. SSA has now established 
a goal of processing 75 percent of subsidy applications in 60 
days.[Footnote 16] In March 2007, SSA provided us with information 
showing the percentage of subsidy applications processed within certain 
periods of time, ranging from 30 days or less, to over 120 
days.[Footnote 17] SSA's data as of mid-March for calendar year 2007 
showed that of the approximately 213,000 applications received, SSA had 
processed about 94 percent in 60 days or less, compared to nearly 91 
percent of the approximately 1.3 million applications within the same 
time frame for calendar year 2006. 

Appeals: 

Individuals may appeal denied subsidy determinations, as well as the 
level of the subsidy, by calling SSA's national toll-free number or 
calling, writing, or visiting any Social Security field office. 
Individuals may also complete an appeals form available on SSA's Web 
site and mail it in to SSA. Individuals have the choice of having their 
appeal conducted through a telephone hearing or a case file review. To 
process appeals, SSA established six Special Appeals Units. SSA tracks 
data on the total number of appeals and the time it takes to process 
them, the method used to resolve appeals, the reason for appeals, and 
the final disposition of appeals. However, SSA does not currently have 
a performance goal to assess the timeliness of its appeals decisions, 
and lacks the capability to report this information. In follow-up with 
SSA officials on their comments on a draft of this report, they told us 
that the agency is planning to establish a goal of processing 75 
percent of appeals in 60 days, but will have to modify its system to 
report this information. SSA officials told us that they have managed 
the appeals process by redirecting resources when case-processing times 
for appeals exceed 60 days. 

Regarding data on SSA's appeals process, an SSA sample, conducted in 
July 2006, showed that about 80 percent of individuals chose to have a 
case file review. According to SSA data on appeals from August 2005 to 
February 2007, it received about 79,000 appeals and completed about 
76,000. The number of appeals was consistent with SSA's initial 
estimate that about 3 percent of denied subsidy applications would be 
appealed, based on its experience with other programs. 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 from November 2005 and July 2006, declined between August and 
November 2006, and rose again between December 2006 and February 2007 
(See table 3). During the decline, SSA closed all but one of its 
Special Appeals Units by October 2006. 

Table 3: SSA Appeals Workloads, August 2005-February 2007: 

Month: August 2005; 
Number of appeals received: 23; 
Number of appeals processed: 19; 
Average processing time (in days): 1.6. 

Month: September 2005; 
Number of appeals received: 422; 
Number of appeals processed: 253; 
Average processing time (in days): 2.5. 

Month: October 2005; 
Number of appeals received: 1,981; 
Number of appeals processed: 1,366; 
Average processing time (in days): 6.1. 

Month: November 2005; 
Number of appeals received: 7,443; 
Number of appeals processed: 2,498; 
Average processing time (in days): 11.3. 

Month: December 2005; 
Number of appeals received: 16,057; 
Number of appeals processed: 4,883; 
Average processing time (in days): 22.2. 

Month: January 2006; 
Number of appeals received: 13,023; 
Number of appeals processed: 4,543; 
Average processing time (in days): 40.0. 

Month: February 2006; 
Number of appeals received: 10,116; 
Number of appeals processed: 8,070; 
Average processing time (in days): 46.1. 

Month: March 2006; 
Number of appeals received: 8,714; 
Number of appeals processed: 12,614; 
Average processing time (in days): 68.2. 

Month: April 2006; 
Number of appeals received: 3,305; 
Number of appeals processed: 11,611; 
Average processing time (in days): 80.1. 

Month: May 2006; 
Number of appeals received: 3,467; 
Number of appeals processed: 10,221; 
Average processing time (in days): 88.3. 

Month: June 2006; 
Number of appeals received: 2,709; 
Number of appeals processed: 8,209; 
Average processing time (in days): 80.2. 

Month: July 2006; 
Number of appeals received: 1,913; 
Number of appeals processed: 1,795; 
Average processing time (in days): 90.5. 

Month: August 2006; 
Number of appeals received: 983; 
Number of appeals processed: 1,276; 
Average processing time (in days): 75.8. 

Month: September 2006; 
Number of appeals received: 613; 
Number of appeals processed: 1,836; 
Average processing time (in days): 58.7. 

Month: October 2006; 
Number of appeals received: 226; 
Number of appeals processed: 1,261; 
Average processing time (in days): 71.9. 

Month: November 2006; 
Number of appeals received: 689; 
Number of appeals processed: 935; 
Average processing time (in days): 48.6. 

Month: December 2006; 
Number of appeals received: 3,014; 
Number of appeals processed: 1,254; 
Average processing time (in days): 16.3. 

Month: January 2007; 
Number of appeals received: 2,603; 
Number of appeals processed: 1,209; 
Average processing time (in days): 25.6. 

Month: February 2007; 
Number of appeals received: 1,892; 
Number of appeals processed: 2,463; 
Average processing time (in days): 41.5. 

Source: SSA Appeals Workload Summary, as of February 27, 2007. 

[End of table] 

The time it took SSA to process appeals varied widely, and did not 
necessarily decrease when the caseloads grew smaller. For example, SSA 
appeals workload data showed that it took SSA an average of 80 days to 
resolve approximately 11,600 appeals in April 2006, but took about 90 
days to resolve about 1,800 appeals in July 2006. SSA data from 
December 2006 through February 2007 also show that the agency's 
processing time for resolving appeals has not shown consistent 
improvement. For example, it took SSA an average of 16 days to process 
1,254 appeals in December 2006, but 42 days to process 2,463 appeals in 
February 2007. An SSA July 2006 sample of 781 appeals showed that 63 
percent of appeals were filed based on applicants' challenges regarding 
an income issue, 24 percent were based on applicants' challenge 
regarding a resource issue, and 13 percent were based on other issues, 
such as an applicant's failure to respond to SSA requests for 
additional data in a timely manner. SSA officials stated that the 
agency plans to broaden the sampling effort to better understand the 
reasons for appeals. 

Redeterminations: 

According to the MMA and SSA regulations, all recipients of the low- 
income subsidy are required to have a redetermination of their 
eligibility within 1 year after SSA first determines their 
eligibility.[Footnote 18] Future redeterminations are required to be 
conducted at intervals determined by the Commissioner. SSA's 
regulations provide that these periodic redeterminations be conducted 
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. However, there is no specific requirement that 
recipients report such changes. SSA tracks various results from the 
redeterminations process, such as the number of decisions made, and 
number and level of continued subsidies, but does not track the amount 
of time needed to complete redetermination decisions. 

SSA initiated its first cycle of redeterminations in August 2006, which 
included 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. As a result, SSA 
sent approximately 1.2 million notices to inform individuals that their 
continued eligibility status was being reviewed. The notice also 
provided individuals with the income and resources data contained in 
SSA's files and asked them to notify SSA if the information had 
changed. SSA subsequently sent 242,000 forms to beneficiaries who 
reported changes to their income or resources, or whom SSA had 
identified as having such changes from other sources, to allow them to 
indicate changes to the information or dispute it. 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 does not track processing time for redetermination decisions and 
has not established a performance time target for processing such 
actions. 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. 
However, as stated previously, GAO internal control standards state 
that agencies should establish performance measures for all activities 
and compare actual performance against expected goals. Without such 
data, SSA will be unable to identify areas in need of improvement. 

The Impact of the Subsidy Program Has Been Manageable: 

Although the subsidy program affected SSA's workload and operations, 
SSA officials said that the additional workload was manageable overall. 
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 stated that the agency's 
major activities for implementing low-income subsidy activities for 
fiscal year 2004 included preparing public information materials for 
the subsidy, systems development, and developing internal training 
materials for staff. Officials also stated that major subsidy work 
activities for fiscal year 2005 included hiring the approximately 2,200 
field office staff, processing subsidy applications, and establishing 
Special Appeals Units. For fiscal year 2006, SSA provided us with data 
showing that staff spent the equivalent of approximately 2,190 work 
years on low-income subsidy activities, with almost 50 percent of the 
time used to process subsidy applications. These activities included 
processing subsidy applications and resolving appeals, and developing 
business process planning and systems development for the 
redeterminations process. 

SSA officials stated that the agency's new responsibilities under the 
subsidy program have not adversely affected its other workloads. In 
fact, SSA officials pointed out that the processing times for other 
workloads improved in fiscal years 2005 and 2006. For example, SSA 
exceeded its goal of paying 83 percent of initial claims for retirement 
and survivor benefits at the earliest point due, or 14 days after an 
applicant filed a claim--the actual performance was approximately 85 
and 87 percent, respectively. Additionally, SSA exceeded its goal of 
paying 75 percent of SSI claims for the elderly before their payment 
was due, or no more than 14 days after an applicant filed a claim--the 
actual performance was approximately 85 and 88 percent, respectively. 

Although SSA can track expenditures for implementing its various MMA 
responsibilities overall, it cannot track expenditures related 
specifically to low-income subsidy activities or other specific 
sublevel MMA activities. For example, SSA cannot calculate the total 
amount of the $500 million congressional appropriation it received for 
MMA start-up costs that 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 the subsidy program are about 
$175 million annually, based on workload samples. However, SSA is 
planning to develop a tracking mechanism to more accurately capture the 
data. 

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 congressional appropriation it received 
for administrative start-up costs to implement its MMA 
responsibilities. SSA officials also told us 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 typically have been held from November to December. 

SSA's spending on its Medicare activities peaked in fiscal year 2005 
(see table 4) as supported by the $500 million congressional 
appropriation for MMA start-up activities; more recent increases in 
such spending could cause pressure on SSA's other workloads in the 
future. The amount of SSA's administrative costs covered by the 
Medicare Trust Funds increased by about 37 percent between fiscal year 
2003 and estimated spending in fiscal year 2008. The minimal impact of 
the subsidy workload and other MMA activities through fiscal year 2006 
was due, in part, to the $500 million separately appropriated by the 
Congress. Now that the additional $500 million is exhausted, SSA's MMA 
responsibilities must compete with all other workloads for resources 
within the overall administrative appropriation limits. If the cost of 
SSA's Medicare workload increases, as it has done recently, SSA's other 
workloads may experience pressure if the overall administrative 
appropriation does not increase proportionately. 

Table 4: SSA's Outlays Covered by the Medicare Trust Funds, Fiscal 
Years 2003-2008: 

Dollars in millions. 

Fiscal year: 2003; 
Outlays, not including the $500 million congressional appropriation: 
$1,214.6; 
Outlays from the $500 million congressional appropriation: $0; 
Total outlays: $1,214.6; 
Percentage increase in total outlays since fiscal year 2003: -. 

Fiscal year: 2004; 
Outlays, not including the $500 million congressional appropriation: 
1,184.0; 
Outlays from the $500 million congressional appropriation: 53.9; 
Total outlays: 1,237.9; 
Percentage increase in total outlays since fiscal year 2003: 1.9 %. 

Fiscal year: 2005; 
Outlays, not including the $500 million congressional appropriation: 
1,364.4; 
Outlays from the $500 million congressional appropriation: 346.5; 
Total outlays: 1,710.9; 
Percentage increase in total outlays since fiscal year 2003: 40.9 %. 

Fiscal year: 2006; 
Outlays, not including the $500 million congressional appropriation: 
1,568.8; 
Outlays from the $500 million congressional appropriation: 111.4; 
Total outlays: 1,680.2; 
Percentage increase in total outlays since fiscal year 2003: 38.3 %. 

Fiscal year: 2007 (estimate); 
Outlays, not including the $500 million congressional appropriation: 
1,600.1; 
Outlays from the $500 million congressional appropriation: 0; 
Total outlays: 1,600.1; 
Percentage increase in total outlays since fiscal year 2003: 31.7 %. 

Fiscal year: 2008 (request); 
Outlays, not including the $500 million congressional appropriation: 
1,661.5; 
Outlays from the $500 million congressional appropriation: 0; 
Total outlays: 1,661.5; 
Percentage increase in total outlays since fiscal year 2003: 36.8 %. 

Totals; 
Outlays, not including the $500 million congressional appropriation: 
$8,593.4; 
Outlays from the $500 million congressional appropriation: $ 511.8[A]; 
Total outlays: $9,105.2[B]; 
Percentage increase in total outlays since fiscal year 2003: -. 

Source: Social Security Administration, "Budget Justification for 
Appropriations Committees," fiscal years 2005, 2006, 2007, and 2008. 

Note: The $500 million appropriation for MMA start-up costs was 
available for fiscal years 2004 to 2006 only. 

[A] SSA officials stated that outlays appear to exceed the $500 million 
appropriation due to the funds being outlayed, recovered, and then 
outlayed again in subsequent years. 

[B] The increase in Medicare spending occurred despite the transfer of 
the Medicare appeals processing function from SSA to CMS in 2005. 

[End of table] 

Conclusions: 

SSA has made progress in approving individuals for the low-income 
subsidy, but has not established specific performance goals and 
measures for its outreach activities. Without such goals and measures, 
SSA will not have a means to assess the effectiveness of its efforts, 
or to identify areas that require improvement as it moves forward. 
Having such goals and measures takes on heightened importance now since 
SSA is conducting outreach efforts on a more limited basis. Although no 
reliable data currently exist on the population of individuals who 
might qualify for the subsidy, SSA does not need such data to establish 
specific performance goals and measures to assess its outreach efforts. 
For example, SSA could set specific goals and measures to assess the 
effectiveness if its outreach efforts for subpopulations where there is 
an underrepresentation of subsidy applications. Monitoring the progress 
of such efforts could help SSA to identify areas where increased 
outreach efforts are needed. 

Assessing the performance of outreach efforts can also help SSA to make 
more efficient use of staff resources by directing them to areas where 
increased outreach efforts are needed to encourage applications among 
underrepresented segments of the eligible population. While advocacy 
groups have called for a more personalized outreach approach, such as 
door-to-door contact, to encourage additional enrollments among 
Medicare beneficiaries, it may be difficult for SSA to conduct such 
efforts, given its resource limitations. Also, it is unclear how much 
more outreach is needed, given the lack of reliable data on the 
eligible population. The extent of additional outreach efforts will 
also depend on SSA's ability to more precisely identify remaining 
individuals eligible for the subsidy. However, it is not clear to what 
extent additional taxpayer data from IRS could help SSA to better 
target individuals potentially eligible for the subsidy. Until an 
effort is undertaken to better determine the size of the population 
that is eligible for the subsidy, it will be difficult for SSA and 
others to assess its progress in approving individuals for the subsidy. 

Finally, while SSA has considerable data on its subsidy application 
processes, it lacks systematic performance indicators to compare 
results to expected goals. Without processing time data for 
redetermination decisions, and performance measures for all subsidy 
application processes, SSA will not have the information that it needs 
to assess the quality of the services it provides or to identify areas 
of improvement. The importance of identifying people who could benefit 
from the subsidy, coupled with ensuring a timely and reliable process 
for deciding initial determinations, hearing appeals, and making 
redeterminations, is essential to the success of the low-income 
subsidy. 

Recommendations for Executive Action: 

To improve SSA's outreach efforts and its ability to measure the 
effectiveness of the Medicare Part D low-income subsidy application 
processes, we recommend that the Commissioner of Social Security: 

˛ establish specific performance goals and measures for SSA's outreach 
activities to provide the agency with a means to assess their 
effectiveness in soliciting applications from additional individuals 
who qualify for the subsidy, but have not yet applied, and: 

˛ direct staff to begin collecting data on the processing time for 
individual redetermination decisions, and establish performance 
standards for processing time for the appeals and redetermination 
decisions. 

We also recommend that the Commissioners of SSA and IRS work together 
to assess the extent to which IRS tax data may help SSA to better 
target individuals who might qualify for the subsidy, possibly aiding 
SSA in better targeting its outreach efforts. This effort could also 
aid in developing more precise estimates of the eligible population and 
help to better inform the Congress on legislative proposals to allow 
IRS to share tax data with SSA to assist the agency with its outreach 
efforts. 

Agency Comments: 

We obtained written comments on a draft of this report from the 
Commissioners of SSA and IRS. SSA agreed in theory with our 
recommendation to develop a comprehensive plan, with specific 
performance goals and measures, to detail the agency's strategy for 
encouraging individuals who qualify for the subsidy to apply. In its 
response and in a follow-up discussion, SSA stated that it believes 
that its National Strategic Communications Plan serves as a 
comprehensive plan for its outreach efforts agencywide, but stated that 
it would not be able to implement specific goals and measures due to 
the lack of reliable data on the eligible population. We agree that 
SSA's National Strategic Communications Plan serves as a comprehensive 
plan for describing the agency's outreach efforts, and revised our 
recommendation accordingly. However, we do not believe that data on the 
potentially eligible subsidy population, while useful, are needed for 
SSA to establish specific performance goals and measures to assess the 
effectiveness of its outreach efforts. 

SSA disagreed with our recommendation to begin collecting data on the 
processing time for redetermination decisions, and establish 
performance standards for processing times for appeals and individual 
redetermination decisions. SSA stated that it monitors the time for 
completing the overall redetermination cycle, which provides adequate 
management controls for operational data. On the basis of GAO's 
internal control standards, we believe that SSA should measure the time 
for processing individual redetermination decisions because it could 
provide the agency with information on the efficiency of processing 
such decisions. While SSA stated that it had established a performance 
standard for assessing the timeliness of appeals, in a follow-up 
discussion with agency officials after receiving their comments, they 
told us that the goal did not currently exist, but that the agency is 
planning to establish a goal of processing 75 percents of appeals in 60 
days. SSA officials added that the agency would have to conduct 
additional programming to produce management information for this data. 

SSA agreed with our recommendation for the agency to work with IRS to 
assess the extent to which IRS tax data may help SSA to better identify 
individuals who might qualify for the subsidy. SSA stated that it has 
begun discussions with IRS to evaluate how such a study might be 
designed. IRS also agreed with this recommendation and stated that it 
is willing to work with SSA in conducting such a study. IRS emphasized, 
however, that current law prohibits the agency from sharing tax 
information, other than in statistical form, before an individual 
applies for the subsidy. IRS also discussed various limitations that 
could affect the usefulness of its tax data. For example, IRS stated 
that its data may only be useful in screening out individuals who do 
not qualify for the subsidy. In view of this, we adjusted our 
recommendation to reflect that the study may assist SSA in better 
targeting individuals who might qualify for the subsidy, rather than 
identifying this population. 

SSA's comments are reproduced in appendix III, and IRS comments are 
reproduced in appendix IV. Technical comments provided by each of these 
agencies have been included in the report as appropriate. 

As agreed with your offices, unless you publicly announce its contents 
earlier, we plan no further distribution of this report until 30 days 
after its issue date. At that time, we will send copies of this report 
to the Commissioner of SSA, the Secretary of HHS, the Commissioner of 
IRS, and other interested parties. Copies will also be made available 
at no charge on GAO's Web site at http://www.gao.gov. 

If you have questions concerning this report, please call me on (202) 
512-7215. Contact points for our Offices of Congressional Relations and 
Public Affairs, respectively, are Gloria Jarmon, who may be reached on 
(202) 512-4470, and Paul Anderson, who may be reached on (202) 512- 
4800. 

Signed by: 

Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Objectives, Scope, and Methodology: 

To assess the Social Security Administration's (SSA) implementation of 
the Medicare Part D low-income subsidy, we reviewed the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) to 
understand SSA's responsibilities under the law. We also reviewed 
various policies and regulations SSA established to carry out its new 
responsibilities, as well as guidance provided to field office staff to 
assist them in answering questions about the subsidy and taking subsidy 
applications. We obtained information on SSA's implementation 
activities from SSA officials in the agency's headquarters in 
Baltimore, Maryland, and in two regional offices, and from management 
and staff in eight SSA field office locations in Texas, Maryland, 
Virginia, and Pennsylvania. We selected SSA offices in those states 
because of the large number of subsidy applications that had been 
mailed to individuals who were potentially eligible for the subsidy. In 
addition, we selected SSA offices in Pennsylvania and Texas in 
particular because they had counties (Philadelphia County in 
Pennsylvania and Dallas and Fort Worth Counties in Texas) that had the 
most low-income subsidy applicants as of June 2006. To understand state 
Medicaid agencies' responsibilities for administering the subsidy, we 
reviewed regulations provided to these agencies from the Department of 
Health and Human Service's (HHS) Centers for Medicare and Medicaid 
Services (CMS). In addition, we discussed views on SSA's implementation 
actions and feedback that had been received from clients on the subsidy 
with state Medicaid agency officials in Colorado, Kansas, Utah, 
Pennsylvania, and Texas. We selected state Medicaid offices in 
Colorado, Kansas, Pennsylvania, and Utah because they had established 
processes to make low-income subsidy determinations. We also selected 
the Colorado and Kansas state Medicaid agencies because we wanted to 
gain the perspectives of state officials that had made low-income 
subsidy determinations. We visited the Texas state Medicaid agency to 
gain the perspective of a state that had not yet set up such a process, 
but had plans to do so in the future. We also interviewed state Health 
Insurance program officials in Pennsylvania and Texas, and officials 
from six advocacy groups, including the Access to Benefits Coalition, 
the Health Assistance Partnership of Families USA, and the Henry J. 
Kaiser Family Foundation. To obtain a contextual framework of concerns 
surrounding the subsidy and issues that could affect its 
implementation, we reviewed reports from GAO, the Congressional 
Research Service, the Office of Inspector General of HHS, and various 
reports from advocacy groups representing the elderly and disabled, 
whom the subsidy was primarily designed to benefit. 

To assess SSA's progress in identifying individuals potentially 
eligible for the subsidy, we discussed the methodology the agency used 
to target this population with SSA Medicare Task Force officials 
responsible for implementing the subsidy program; we also discussed 
with them the agency's overall outreach strategy and obtained and 
reviewed supporting documentation. In particular, we discussed in 
detail how SSA developed the approximately 18.6 million population of 
individuals to whom it targeted its original mass mailing of subsidy 
material, as well as how it more narrowly targeted groups within that 
population. We reviewed SSA's target population by looking at the 
number of total Medicare recipients and estimates of the total eligible 
population developed by the Congressional Budget Office, CMS, and 
others. We also met with Internal Revenue Service (IRS) officials to 
discuss the data restriction, and concerns officials would have if the 
law were changed to grant SSA access to IRS data for better targeting 
outreach efforts. To understand SSA's efforts to solicit subsidy 
applications, we discussed with SSA officials the process used to 
develop subsidy outreach materials and cognitive tests that had been 
conducted to ensure that the materials were written at an appropriate 
educational level for the target population. We discussed SSA's 
outreach methodology with officials from CMS, state Medicaid agencies, 
and various advocacy groups. Additionally, we discussed and obtained 
supporting documentation of training provided to field office staff on 
the subsidy and discussed with staff the usefulness of the training. 

To review SSA's subsidy application processes--making eligibility 
determinations, resolving appeals, and redetermining individuals' 
continued subsidy eligibility--we reviewed the laws and regulations 
relating to each of these processes and SSA's strategic plan for 
relevant performance goals and measures. Specifically for the subsidy 
eligibility determinations process, we reviewed monthly data on the 
total number of subsidy determinations. For applicants that had been 
denied the subsidy, we obtained and reviewed available data on the 
reasons for the decisions. We requested SSA data on the timeliness of 
the eligibility determinations, but were told that while SSA captured 
the data in its Medicare Applications System, it had only recently 
developed the business requirement to report the data. Regarding SSA's 
appeals resolution process, we reviewed three SSA studies on samples of 
appeals identifying the reasons for the appeals and the final 
disposition of the appeal. We also reviewed SSA data on the total 
number of appeals filed and the length of time for resolving them. 
Regarding the redeterminations process, we reviewed data on the number 
of determinations conducted during the first cycle in 2006 and the 
statistics on the results. We discussed with SSA officials the actions 
that it planned to take to provide information on these processes, as 
well as SSA's plans for developing performance goals and measures for 
these processes. On the basis of electronic data provided to us, we 
were generally able to verify some data on the processing time for 
eligibility determinations. However, we did not have all of the 
information needed to verify the validity of other data. 

To determine the impact that subsidy work activities had on SSA 
operations, we discussed the issue with SSA headquarters officials and 
field office managers and staff. In particular, we obtained and 
reviewed SSA estimates of the resources the agency would need to 
implement the low-income subsidy and discussed with SSA officials the 
mechanisms for assessing the program's impact. We also coordinated with 
another GAO team that is reviewing how SSA spent the $500 million 
appropriation for implementing all of the agency's responsibilities 
under the MMA. In addition, we reviewed SSA's methods for tracking 
financial expenditures and staff time dedicated to Part D activities. 
We also discussed with SSA the implications of possible budget 
restrictions and reductions in carrying out its Part D work. Finally, 
we reviewed SSA budget documents and spending on the Medicare Trust 
Fund from fiscal year 2003 to fiscal year 2008. 

We conducted our work between May 2006 and April 2007 in accordance 
with generally accepted government auditing standards. 

[End of section] 

Appendix II: Subsidy Application Mailings by State, May 27, 2005-August 
10, 2005: 

State: Alabama; 
Number of mailings: 343,448. 

State: Alaska; 
Number of mailings: 27,384. 

State: Arizona; 
Number of mailings: 363,084. 

State: Arkansas; 
Number of mailings: 237,524. 

State: California; 
Number of mailings: 1,614,086. 

State: Colorado; 
Number of mailings: 249,901. 

State: Connecticut; 
Number of mailings: 212,346. 

State: Delaware; 
Number of mailings: 54,086. 

State: District of Columbia; 
Number of mailings: 29,282. 

State: Florida; 
Number of mailings: 1,434,108. 

State: Georgia; 
Number of mailings: 479,699. 

State: Hawaii; 
Number of mailings: 99,611. 

State: Idaho; 
Number of mailings: 89,457. 

State: Illinois; 
Number of mailings: 769,394. 

State: Indiana; 
Number of mailings: 426,956. 

State: Iowa; 
Number of mailings: 251,207. 

State: Kansas; 
Number of mailings: 195,899. 

State: Kentucky; 
Number of mailings: 325,571. 

State: Louisiana; 
Number of mailings: 290,073. 

State: Maine; 
Number of mailings: 115,475. 

State: Maryland; 
Number of mailings: 332,418. 

State: Massachusetts; 
Number of mailings: 398,717. 

State: Michigan; 
Number of mailings: 658,889. 

State: Minnesota; 
Number of mailings: 312,476. 

State: Mississippi; 
Number of mailings: 186,890. 

State: Missouri; 
Number of mailings: 439,898. 

State: Montana; 
Number of mailings: 75,544. 

State: Nebraska; 
Number of mailings: 125,809. 

State: Nevada; 
Number of mailings: 137,367. 

State: New Hampshire; 
Number of mailings: 87,690. 

State: New Jersey; 
Number of mailings: 500,519. 

State: New Mexico; 
Number of mailings: 122,958. 

State: New York; 
Number of mailings: 1,136,243. 

State: North Carolina; 
Number of mailings: 637,564. 

State: North Dakota; 
Number of mailings: 53,037. 

State: Ohio; 
Number of mailings: 872,963. 

State: Oklahoma; 
Number of mailings: 265,009. 

State: Oregon; 
Number of mailings: 250,344. 

State: Pennsylvania; 
Number of mailings: 994,908. 

State: Rhode Island; 
Number of mailings: 75,955. 

State: South Carolina; 
Number of mailings: 315,913. 

State: South Dakota; 
Number of mailings: 64,853. 

State: Tennessee; 
Number of mailings: 381,972. 

State: Texas; 
Number of mailings: 1,069,524. 

State: Utah; 
Number of mailings: 96,433. 

State: Vermont; 
Number of mailings: 48,985. 

State: Virginia; 
Number of mailings: 469,428. 

State: Washington; 
Number of mailings: 362,295. 

State: West Virginia; 
Number of mailings: 176,397. 

State: Wisconsin; 
Number of mailings: 382,047. 

State: Wyoming; 
Number of mailings: 34,698. 

Total: 
Number of mailings: 18,676,334. 

Source: Social Security Administration. 

[End of table] 

[End of section] 

Appendix III: Comments from the Social Security Administration: 

Social Security: 
The Commissioner: 

May 10, 2007: 

Barbara D. Bovbjerg, Director: 
Education, Workforce, and Income Security Issues: 
U.S. Government Accountability Office: 
441 G St., NW: 
Washington, D.C. 20548: 

Dear Ms. Bovbjerg: 

Thank you for the opportunity to review and comment on the draft 
report, "Medicare Part D Low-Income Subsidy: Additional Efforts Would 
Help Social Security Improve Enrollment and Measure Program Effects" 
(GAO-07-555). 

Enclosed are our detailed comments to the draft report recommendations 
along with suggested technical revisions. 

If you have any questions, please contact Ms. Candace Skurnik, 
Director, Audit Management and Liaison Staff, at (410) 965-4636. 

Sincerely, 

Signed by: 

Michael J. Astrue: 

Enclosure: 

Social Security Administration: 
Baltimore MD 21235-0001: 

Comments On The Government Accountability Office (GAO) Draft Report. 
"Medicare Part D Low-Income Subsidy: Additional Efforts Would Help 
Social Security Improve Enrollment And Measure Program Effects" (GAO- 
07-555): 

Thank you for the opportunity to review and comment on the draft 
report. We would like to offer some general comments regarding the 
report. We would suggest changing the title of the report to "Medicare 
Part D Low Income Subsidy: Additional Efforts Would Help Social 
Security Improve Filing and Measure Program Effects." The term 
"enrollment" is used in the Part D program to describe enrollment in 
prescription drug plans. The Social Security Administration (SSA) does 
not enroll Medicare beneficiaries in plans and the use of the phrase 
could lead to a misconception on the part of the reader. This term is 
used throughout the report to describe "filing" for the low-income 
subsidy. 

We also need to question the statement that the early subsidy filings 
compare "somewhat less favorably to the first year of the Supplemental 
Security Income (SSI) program." In looking at the SSI participation 
rate, one has to separate the newly enrolled from the cases transferred 
from the States. Please refer to Menefee, John A., Bea Edwards, and 
Sylvester J. Schieber (1981), "Analysis of Nonparticipation in the SSI 
Program, " Social Security Bulletin 44(6): 3-21. Their data are from 
the Survey of Low-Income Aged and Disabled (SLIAD), which was conducted 
by SSA in 1973 and 1974 around the time of SSI program implementation. 
They produced estimates of participation rates in 1974 of 55 percent 
for the aged and 54 percent for the disabled. They state: 

"Basic SSI participation rates reflect the presence of large numbers of 
transferred welfare cases. Automatic transfers from the old State- 
managed public assistance programs accounted for two-thirds of the aged 
and nearly three-fourths of the disability cases at the end of SSI's 
first year of operation . Less than one-third of the combined SSI 
caseload consisted of new (nontransferred) recipients in late 1974." 
(p.6; Table 1): 

The cover page and page 33 do not provide SSA's current goal for 
processing subsidy applications. An interim goal of "50 percent of 
subsidy applications in 60 days" was used to develop the systems 
requirements for management information. The goal for calendar year 
2007, established in March, is to process "75 percent of the subsidy 
applications in 60 days." 

Our comments on the draft report recommendations, along with technical 
revisions are as follows: 

Recommendation 1: 

SSA should develop a comprehensive plan, with specific performance 
goals and measures, to detail SSA's outreach strategy for enrolling 
additional individuals who qualify for the subsidy. 

Comment: 

We agree in theory. The recommendation indicated SSA would have a basis 
for developing specific goals and measures for its outreach strategy. 
However, the "Conclusions" on page 28, 2nd paragraph of the report 
include the following: "Also it is unclear how much more outreach is 
needed, given the lack of reliable data on the eligible population. The 
extent of additional outreach efforts will also depend on SSA's ability 
to more precisely identify remaining individuals eligible for the 
subsidy." Therefore, we would not be able to implement specific goals 
and measures at this time due to the lack of reliable data on the 
eligible population. 

We will continue our outreach efforts to identify individuals 
potentially eligible for the subsidy and solicit applications from 
them. The subsidy outreach was incorporated in our ongoing general 
outreach activities. This includes on a national level, working closely 
with national organizations, preparing new and updated Medicare 
Modernization Act (MMA) outreach products and placing educational/ 
informational updates and articles in websites, bulletins, programs and 
newsletters. On a local field office (FO) level, it means continuing to 
work with local community organizations and advocacy groups to find 
beneficiaries who may be eligible for the extra help and assist them in 
applying. It also means that when a Medicare beneficiary contacts a FO 
or our 800 number for other Social Security business, we discuss with 
them the potential eligibility for extra help. 

In addition, from May to June 2007, SSA will mail notice to 
approximately 6 million low-income Medicare beneficiaries informing 
them about the Medicare Savings Programs and the extra help (such a 
mailing is made every year). We are also continuing to mail 
approximately 100,000 applications each month to beneficiaries 
attaining initial Medicare eligibility after screening them to 
determine that their income is below 150 percent of the Federal Poverty 
Level. As in past years, SSA has incorporated its message on extra help 
in its Cost-Of-Living Adjustment letters sent each December to over 50 
million beneficiaries. 

Since GAO met with SSA officials in March, SSA has announced a new 
strategy in our continuing efforts to inform the public about extra 
help. The theme, "Show Someone You Love How Much You Care," is designed 
to inform relatives and caregivers - the sons, daughters, grandchildren 
and family friends about the "extra help" program. This new strategy is 
being launched this week for Mother's Day. SSA employees across the 
country are visiting their local community centers, grocery stores, 
flower shops, restaurants and places of worship in a focused effort to 
inform the public about "extra help." SSA also plans to publicize this 
in the local media. The outreach effort will continue throughout the 
year, with a second series of targeted events scheduled for Father's 
Day. For both Mother's and Father's Day, themed brochures will be 
distributed. 

Recommendation 2: 

SSA should direct staff to begin collecting data on the processing time 
for redetermination decisions and establish performance standards for 
processing time for the appeals and redetermination process. 

Comment: 

We disagree. As noted in the report, SSA monitors the time for 
completing the overall redetermination cycle which provides adequate 
management controls for operational data. The approach that SSA has 
adopted with MMA is consistent with our approach in managing the 
redetermination process for the SSI program. Since these MMA 
redeterminations are done during a short time frame (from August to 
December of each year), the decision was made not to invest limited 
systems resources to develop such data. 

SSA has also established the same performance goal for appeals as for 
initial determinations, which is to process 75 percent of the appeals 
in 60 days. 

Recommendation 3: 

The Commissioners of SSA and the Internal Revenue Service (IRS) should 
work together to assess the extent to which IRS tax data may help SSA 
to better identify individuals who might qualify for the subsidy, 
possibly aiding SSA in better targeting outreach efforts. 

Comment: 

We agree. We have already been in discussions with IRS to evaluate how 
such a study might be designed. 

[End of section] 

Appendix IV: Comments from the Internal Revenue Service: 

Department Of The Treasury: 
Internal Revenue Service: 
Washington, D.C. 20224: 
Commissioner: 

May 18, 2007: 

Ms. Barbara D. Bovbjerg: 
Director, Education, Workforce, and Income Security Issues: 
United States Government Accountability Office: 
Washington, DC 20548: 

Dear Ms. Bovbjerg: 

Thank you for the opportunity to respond to your draft report entitled 
"Medicare Part D Low-Income Subsidy, Additional Efforts Would Help 
Social Security Improve Enrollment and Measure Program Effects" (GAO- 
07-555). 

Your report offers two primary recommendations. The first 
recommendation is directed solely to the Social Security Administration 
(SSA). The second recommendation encourages the Commissioners of the 
SSA and the Internal Revenue Service (IRS) to work together to assess 
the extent to which IRS tax data may help the SSA better identify 
individuals who might qualify for the subsidy. 

While the IRS is in agreement that a test should be performed to assist 
the SSA in identifying individuals who might qualify for the Medicare 
Part D low-income subsidy, we recommend changes to the wording of the 
report. The final report should emphasize that current law prohibits 
disclosures to identify those who may be eligible but have not applied 
for the low-income subsidy. In addition, it should indicate that 
Internal Revenue Code section 6103 restrictions are intentional and 
designed to protect taxpayer privacy and enhance tax compliance. Any 
exception to the general rule of confidentiality must be carefully 
weighed against its potential negative impact on taxpayers' 
expectations of privacy. We request that the final report reflect IRS 
concerns regarding the usefulness (the business case) of using tax 
information to identify those who may be eligible. These points were 
made in GAO testimony for the Senate Finance Committee regarding the 
report, and we request that the final report reflect the language used 
in the testimony. Finally, we also ask that the report include the 
additional points raised by the IRS in commenting on the proposed 
testimony. 

A detailed response to the recommendation is enclosed. If you have any 
questions, please call Carolyn Tavenner, Assistant Deputy Commissioner 
for Operations Support, Internal Revenue Service, at (202) 622-7602. 

Sincerely, 

Signed by: 

Kevin M. Brown: 
Acting Commissioner: 

Enclosure: 

Recommendation: 

We also recommend that the Commissioners of SSA and IRS work together 
to assess the extent to which IRS tax data may help SSA to better 
identify individuals who might qualify for the subsidy, possibly aiding 
SSA in better targeting its outreach efforts. This effort could also 
aid in developing more precise estimates of the eligible population and 
help to better inform the Congress on legislative proposals to allow 
IRS to share tax data with SSA to assist the agency with its outreach 
efforts. 

Response: 

The IRS agrees that a test should be conducted and is willing to work 
with the SSA in that effort, with the understanding that present law 
prohibits the IRS from sharing tax information (other than in 
statistical form) as part of the test. 

While this test may help determine the value of the IRS data in 
assisting the SSA with this initiative, we believe that the data may be 
useful only in screening out ineligible individuals. We estimate that 
tax data will only screen out a few hundred thousand of the millions 
who are potentially eligible, and could potentially screen out 
potential eligibles. If the results of the test are not sufficiently 
positive to warrant another exception to the general rule of 
confidentiality, then we recommend that no legislative disclosure 
exception to IRC 6103 should be pursued. 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Barbara D. Bovbjerg (202) 512-7215 or bovbjergb@gao.gov: 

Acknowledgments: 

The following team members made key contributions to this report: Blake 
Ainsworth, Assistant Director; Jeff Bernstein; Kyle Browning; Susannah 
Compton; Mary Crenshaw; Rosamond Katz; Sheila McCoy; Lisa Reynolds; 
Vanessa Taylor; and Paul Wright. 

[End of section] 

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Used by Other Countries and U.S. Private Payers and Federal Programs. 
GAO-07-358T. Washington, D.C.: January 11, 2007. 

Medicare Part D: Prescription Drug Plan Sponsor Call Center Responses 
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Social Security Administration: Medicare Part D Subsidies. GAO-06-344R. 
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Medicare: Contingency Plans to Address Potential Problems with the 
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Medicare Savings Programs: Results of Social Security Administration's 
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(130580): 

FOOTNOTES 

[1] Pub. L. 108-173. 

[2] Medicare is a health insurance program for people 65 years of age 
or older, people under age 65 who meet certain disability requirements, 
and people of all ages with end-stage renal disease (permanent kidney 
failure requiring dialysis or a kidney transplant). There are currently 
over 43 million Medicare beneficiaries. 

[3] In addition to Part D, MMA gave SSA various new responsibilities, 
which include, among others, (1) outreach regarding the Drug Discount 
Card that was temporarily effective before the prescription drug plans 
and the subsidy program took effect, (2) implementing Medicare Part B 
income-based premiums for beneficiaries with income above a stipulated 
level, and (3) premium withholding for Medicare Part C (e.g., Medicare 
Advantage plans). 

[4] Generally, individuals who meet certain criteria and who are 
eligible for Social Security or Railroad Retirement benefits 
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 premium. 
Medicare also offers optional insurance under Supplementary Medical 
Insurance (Part B) to cover doctor's services and outpatient care, and 
requires a premium. 

[5] 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. 

[6] 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 Medicare Part A and Part B 
deductibles and coinsurance. 

[7] 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. 

[8] CMS was required to automatically enroll in a Part D plan those 
full-benefit dual eligibles who failed to do so themselves. For 
purposes of ensuring a smooth transition to Part D coverage, CMS 
notified those individuals that they would be enrolled in a particular 
plan effective on a specified date, but provided them an opportunity to 
select a different plan or to indicate that they did not wish to be 
enrolled in a plan. If individuals did not indicate that they would 
select their own plan or opt out of Part D coverage within the time 
allotted in the notice, the plan selection made by CMS became 
effective. 

[9] The deadline applied to all individuals who were first eligible to 
enroll in a Part D plan on or prior to January 31, 2006. Additional 
rules regarding enrollment periods are set forth in CMS regulations, 42 
C.F.R. § 423.38. 

[10] 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 IRS. 

[11] 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. 

[12] 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, whereas a married couple 65 or 
older, filing jointly, was not required to file tax returns if their 
combined income was less than $18,900. 

[13] 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. 

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

[15] 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. 

[16] 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 
IRS data. 

[17] SSA measured the processing time for eligibility determinations 
from the date of the subsidy application or the date that the applicant 
became eligible for Medicare, whichever was later. 

[18] This does not include individuals who continue to be deemed or 
automatically eligible for the subsidy. Individuals who report certain 
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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