This is the accessible text file for GAO report number GAO-08-824 
entitled 'Medicare Part D Low-Income Subsidy: Assets and Income Are 
Both Important in Subsidy Denials, and Access to State and Manufacturer 
Drug Programs Is Uneven' which was released on September 5, 2008.

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Report to Congressional Committees: 

United States Government Accountability Office: 
GAO: 

September 2008: 

Medicare Part D Low-Income Subsidy: 

Assets and Income Are Both Important in Subsidy Denials, and Access to 
State and Manufacturer Drug Programs Is Uneven: 

GAO-08-824: 

GAO Highlights: 

Highlights of GAO-08-824, a report to congressional committees. 

Why GAO Did This Study: 

To help defray the cost of prescription drugs for beneficiaries with 
limited means, the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) included the low-income subsidy (LIS) 
in the Part D prescription drug insurance program. To qualify for the 
LIS, beneficiaries must be enrolled in a Part D plan and their assets 
and income must be less than the thresholds established by the law. 
Part D is administered by the Centers for Medicare & Medicaid Services 
(CMS), and the Social Security Administration (SSA) administers the 
eligibility determination for the LIS. 

The MMA directed GAO to compare the utilization of and access to Part D 
prescription drugs among beneficiaries who received the LIS with those 
who were denied it because of the amount of their assets. This report 
focuses on beneficiaries’ access to prescription drugs by examining (1) 
the importance of assets and income in LIS denials in 2006 and 2007, 
and (2) state and manufacturer programs providing access to 
prescription drugs for Medicare beneficiaries. To do this, GAO analyzed 
data from SSA, reviewed information on state and drug manufacturer 
pharmaceutical programs, and interviewed officials from SSA, CMS, state 
programs, advocacy organizations, and pharmaceutical manufacturer 
programs. 

What GAO Found: 

In 2006 and 2007, assets and income were both important factors in LIS 
denials, but income was of greater importance. In 2006, 4.5 million 
beneficiaries applied for the LIS and more than half were denied the 
subsidy. About half of LIS denials in 2006 were based solely or in part 
on applicants’ assets exceeding program thresholds, and in 2007, about 
30 percent of LIS denials were for this reason. By contrast, 66.2 
percent of denials were due at least in part to income in 2006 and 81.2 
percent in 2007. Because some applicants in both years were denied the 
LIS by an initial screen that only asked about assets and were not 
required to give information on income, it is impossible to know the 
number of these applicants who would also have been denied the LIS 
because of their income. Among those who provided detailed information 
about their assets, applicants denied the LIS often exceeded the asset 
threshold by a relatively small amount, and in both years more than one-
quarter of these applicants exceeded the threshold by less than $5,000. 

Table: 
Basis for Denial of the LIS for Applicants Denied Due to Assets and 
Income by Percentage of Denied Applicants, 2006 and 2007: 

Year: 2006; 
Initial assets screening question: 22.2%; 
Assets, but not income: 11.6%; 
Both income and assets: 16.6%; 
Income, but not assets: 49.6%; 
Total: 100%; 
Number of persons: 2,252,412. 

Year: 2007; 
Initial assets screening question: 7.1%; 
Assets, but not income: 11.7%; 
Both income and assets: 10.7%; 
Income, but not assets: 70.5%; 
Total: 100%; 
Number of persons: 366,183. 
 
Year: 2006; 
Assets in part or solely: 50.4%; 
Income in part or solely: 66.2%. 

Year: 2007; 
Assets in part or solely: 29.5%; 
Income in part or solely: 81.2%. 

Source: GAO analysis of SSA data. 

[End of table] 

Some states and drug manufacturers offer programs that assist low-
income Medicare beneficiaries in obtaining prescription drugs, but the 
availability of these programs and the assistance they offer are 
uneven. Twenty-three states offer State Pharmaceutical Assistance 
Programs (SPAP), which can supplement Part D benefits. These SPAPs 
differ in the type and extent of assistance they offer, but they 
generally cover some of the beneficiaries’ out-of-pocket prescription 
drug costs. Prescription drug manufacturers’ Patient Assistance 
Programs (PAP) also assist low-income individuals in obtaining 
prescription drugs. However, not all PAPs are open to Part D 
beneficiaries, and the drugs provided are limited to those of the 
sponsoring manufacturers. 

CMS concurred with our report. SSA expressed appreciation that we used 
its analysis of applicants denied the LIS in 2006 and 2007 as the 
foundation for our analysis of the impact of the assets test on LIS 
applicants. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-824]. For more 
information, contact A. Bruce Steinwald at (202) 512-7114 or 
steinwalda@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

Assets and Income Were Important Factors in LIS Denials: 

Some State and Drug Manufacturer Programs Help Beneficiaries, but 
Provide Uneven Access to Prescription Drugs: 

Concluding Observations: 

Agency Comments and Our Evaluation: 

Appendix I: Social Security Administration Application for the Low-
Income Subsidy, 2008: 

Appendix II: Comments from the Centers for Medicare & Medicaid 
Services: 

Appendix III: Comments from the Social Security Administration: 

Appendix IV: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: LIS Benefits by Beneficiary Group, 2008: 

Table 2: Qualified SPAPs Serving Broadly Defined Populations: Coverage 
for Medicare Beneficiaries, 2007: 

Figures: 

Figure 1: Plan and Beneficiary Payments under Part D Prescription Drug 
Standard Benefit, 2008: 

Figure 2: Low-Income Subsidy Application Paths: 

Figure 3: Basis for Denial of the LIS for Applicants Denied Due to 
Assets and Income, 2006 and 2007: 

Figure 4: Percentage of Applicants Who Exceeded the Assets Threshold, 
by Amount over the Threshold, 2006 and 2007: 

Figure 5: Geographic Distribution of SPAPs, 2007: 

Figure 6: Income Eligibility Requirements as a Percentage of the 
Federal Poverty Level for SPAPs That Assist Broadly Defined 
Populations, 2007: 

Abbreviations: 

CMS: Centers for Medicare & Medicaid Services: 

FPL: federal poverty level: 

HHS: Department of Health and Human Services: 

LIS: low-income subsidy: 

MMA: Medicare Prescription Drug, Improvement, and Modernization Act of 
2003: 

OIG: Office of Inspector General: 

PACE: Pharmaceutical Assistance Contract for the Elderly: 

PAP: patient assistance program: 

PDP: prescription drug plan: 

SPAP: state pharmaceutical assistance program: 

SSA: Social Security Administration: 

SSI: supplemental security income: 

TrOOP: true out-of-pocket: 

[End of section] 

United States Government Accountability Office:
Washington, DC 20548: 

September 5, 2008: 

Congressional Committees: 

The Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (MMA) created a voluntary outpatient prescription drug insurance 
program, known as Medicare Part D, that provides prescription drug 
coverage for over 25 million beneficiaries--seniors and individuals 
with disabilities--enrolled in the program.[Footnote 1] Under this 
program, which began in January 2006, Medicare beneficiaries can enroll 
in prescription drug plans run by private companies that contract with 
the Centers for Medicare & Medicaid Services (CMS), the agency in the 
Department of Health and Human Services (HHS) that administers the 
Medicare program.[Footnote 2] The Part D program shares the cost of 
these drug plans with enrollees. 

To help further defray the costs of prescription drugs for 
beneficiaries with limited financial means, the MMA included a 
provision for a low-income subsidy (LIS). Through the LIS, Medicare 
assists these beneficiaries with their out-of-pocket prescription drug 
expenses, with the amount of assistance depending on beneficiaries' 
income and assets.[Footnote 3] To qualify for the LIS, applicants must 
meet two conditions: (1) their income and assets must be less than the 
thresholds established by the MMA; and (2) they must be enrolled in a 
Part D plan.[Footnote 4] (For 2008, the income threshold for the LIS is 
$15,600 for individuals and $21,000 for couples; the asset threshold is 
$11,990 for individuals and $23,970 for couples.)[Footnote 5] The 
Social Security Administration (SSA) administers the LIS eligibility- 
determination process, notifying CMS whether an individual applicant 
has been approved for the LIS or denied it.[Footnote 6] In addition to 
the Part D LIS, some state and drug manufacturer programs provide 
prescription drug assistance to Medicare beneficiaries with low 
incomes. 

Prior to the enactment of the MMA, there was considerable discussion 
among policymakers about the appropriateness of using an asset test (in 
addition to an income test) to determine eligibility for the LIS. Some 
contended that an income test alone was sufficient to identify those 
who needed the LIS and that an asset test would prevent seniors who 
needed assistance from qualifying for it. Following these discussions, 
the MMA directed us to compare the utilization of and access to Part D 
drugs among beneficiaries who received the LIS with those denied it 
because of the amount of their assets.[Footnote 7] We will address this 
mandate in two reports. This report focuses on Medicare beneficiaries' 
access to prescription drugs by examining: (1) the importance of assets 
and income in LIS denials in 2006 and 2007; and (2) state and drug 
manufacturer programs providing access to prescription drugs for 
Medicare beneficiaries. We will issue a second report comparing the 
prescription drug utilization of those who received the LIS with those 
who were denied it because of their assets. 

Our analysis is limited to LIS applicants; individuals deemed eligible 
for the LIS--dual eligibles and supplemental security income (SSI) 
recipients--are not within our scope because they do not have to apply 
for it.[Footnote 8] To examine the impact of the asset test on LIS 
applicants, we reviewed SSA documentation and examined SSA's analyses 
of applicants who were denied the LIS. We did not independently examine 
SSA's data, but SSA checked applicant information against its own and 
other federal databases. We therefore determined that these data are 
sufficiently reliable for our purposes. 

To examine potential access to other sources of assistance with 
prescription drug costs, we reviewed literature on state programs and 
the requirements of these programs. We also examined CMS information on 
programs established by states and pharmaceutical manufacturers to 
assist individuals in obtaining drugs. We interviewed state program 
officials and representatives of pharmaceutical manufacturer programs. 

We conducted this performance audit from August 2007 through July 2008 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. 

Results in Brief: 

Assets and income were both important factors in LIS denials in 2006 
and 2007, but assets were less important than income. In 2006, half of 
all denials were due at least in part to assets, and nearly two-thirds 
were due to income, while in 2007 about 30 percent were at least in 
part due to assets and over 80 percent were due to income. Because all 
LIS applicants who were denied the LIS on the basis of an assets 
screening question were not required to answer questions about their 
income, it is not possible to know the number of these individuals who 
would also have failed to qualify for the LIS because of their income. 
Beneficiaries denied the LIS who answered the detailed questions about 
assets often exceeded the asset threshold by a relatively small amount. 
For example, over one-quarter of these applicants exceeded the asset 
threshold by less than $5,000 in both 2006 and 2007. Overall, more than 
one-half of the 4.5 million applicants for the LIS were denied the 
subsidy in calendar year 2006 and about 56 percent were denied it in 
fiscal year 2007.[Footnote 9] 

States and drug manufacturers offer other programs that assist some low-
income Medicare beneficiaries in obtaining prescription drugs, but 
these programs provide uneven national access to drugs. Less than half 
the states offer State Prescription Assistance Programs (SPAP), which 
can supplement Part D benefits. These SPAPs differ in the type and 
extent of assistance they offer, but they generally cover some or all 
of the beneficiary's out-of-pocket prescription drug costs. All broadly 
defined SPAPs require beneficiaries to pass an income test, but only 
one also has an asset test. Prescription drug manufacturers' Patient 
Assistance Programs (PAP) also assist low-income individuals in 
obtaining prescription drugs. However, not all PAPs are available to 
Part D beneficiaries, and the drugs provided are limited to those of 
the sponsoring manufacturers. 

We provided a draft of this report to CMS and SSA. CMS concurred with 
our report and its concluding observations. SSA expressed appreciation 
that we used its analysis of applicants denied the LIS in 2006 and 2007 
as the foundation for our analysis of the impact of the asset test on 
LIS applicants. CMS' written comments appear in appendix II. SSA's 
written comments appear in appendix III. 

Background: 

All Medicare beneficiaries who have either Part A or Part B coverage 
and reside in the United States (the 50 states and the District of 
Columbia) can obtain Part D coverage.[Footnote 10] Under Part D, both 
the beneficiary and the plan pay a portion of the cost of covered 
prescription drugs. In general, beneficiaries are responsible for 
paying monthly premiums, an annual deductible, and copayments. For 
2008, under the standard benefit, beneficiaries pay a deductible of 
$275 as well as 25 percent of the cost of their prescription drugs up 
to the initial coverage limit of $2,510 (which includes expenditures by 
both the plan and the beneficiary).[Footnote 11] Beneficiaries then 
enter the coverage gap (also called the doughnut hole) where they pay 
the entire cost of their prescription drugs. The annual catastrophic 
threshold is $5,726.25. At this point, the beneficiary's "true out-of- 
pocket" (TrOOP) payment has amounted to $4,050 with the remainder 
($1,676.25) paid by the plan. After reaching the annual catastrophic 
threshold, the beneficiary is responsible for only modest cost sharing: 
the higher of 5 percent of the prescription drug's cost or $2.25 for a 
generic drug and $5.60 for a brand name drug.[Footnote 12] (See figure 
1.) 

Figure 1: Plan and Beneficiary Payments under Part D Prescription Drug 
Standard Benefit, 2008: 

[See PDF for image] 

This figure is an illustration of Plan and Beneficiary Payments under 
Part D Prescription Drug Standard Benefit, 2008, as follows: 

Year-to-date drug costs (in dollars): 0-$275 (deductible); 
Percent paid by beneficiary: 100%: 
* Plan payment: 0; 
* Beneficiary payment: 100%. 

Year-to-date drug costs (in dollars): $275-$2,510 (initial coverage 
limit); 
Percent paid by beneficiary: 100%: 
* Plan payment: 75%; 
* Beneficiary payment: 25%. 

Year-to-date drug costs (in dollars): $2,510-$5,725 (catastrophic 
threshold); 
Percent paid by beneficiary: 100%: 
* Plan payment: 0; 
* Beneficiary payment: 100% (coverage gap). 

Year-to-date drug costs (in dollars): $5,725 through catastrophic 
coverage; 
Percent paid by beneficiary: 100%; 
* Plan payment: 95%; 
* Beneficiary payment: 5%. 

Source: GAO analysis of CMS information. 

Note: The standard benefit in 2008 includes a $275 deductible, after 
which beneficiaries pay 25 percent of their total drug costs up to an 
initial limit of $2,510. This is followed by a coverage gap in which 
beneficiaries pay the entire cost of their drugs until they have spent 
a total of $4,050 out of pocket for their drug costs. From that point 
on, beneficiaries pay 5 percent of a drug's actual cost or $2.25 for a 
generic drug or $5.60 for a brand name drug, whichever is greater. 
Beneficiary payments may differ for plans that choose to offer 
alternative coverage that is actuarially equivalent to the standard 
benefit. 

[End of figure] 

The Low-Income Subsidy (LIS): 

When Congress passed Part D, it also provided the LIS, an additional 
subsidy for beneficiaries with limited assets and income to help them 
pay their portion of out-of-pocket costs. Most Medicare beneficiaries 
who receive the LIS are "deemed"--that is, they qualify for the subsidy 
automatically on the basis of being Medicaid or Supplemental Security 
Income (SSI) recipients, or because they are enrolled in certain 
Medicare Savings Programs.[Footnote 13] Those beneficiaries who are not 
deemed must apply for the LIS and show that their assets and income are 
below specified limits. As of January 2008, CMS data showed that 9.38 
million beneficiaries were receiving the LIS, of whom 7.85 million had 
been deemed and 1.53 million had applied for the subsidy. CMS estimated 
that there were 2.6 million beneficiaries who were eligible for the LIS 
but not receiving it. 

The amount of assistance provided to LIS recipients is also determined 
by their income and assets. All LIS recipients are entitled to a 
premium subsidy that is based on their income.[Footnote 14] For 
recipients of the LIS who had to apply for it, the premium subsidy is 
100 percent for individuals or couples whose income is less than 135 
percent of the federal poverty level (FPL). It varies by income for 
such recipients whose income is less than 150 percent of the FPL but 
greater than or equal to 135 percent of the FPL[Footnote 15]. LIS 
recipients eligible for a full premium subsidy pay no premium if they 
enroll in a Part D plan offering basic prescription drug coverage with 
a premium less than or equal to the benchmark premium for their area. 
[Footnote 16] They also can choose to enroll in a plan with a premium 
higher than the benchmark premium and pay the difference between the 
two. Similarly, LIS recipients entitled to a partial premium subsidy 
pay the difference between their plan's premium and the percentage of 
the plan's premium subsidy amount determined by their income level. 
(See table 1.) 

Table 1: LIS Benefits by Beneficiary Group, 2008: 

Annual income (percentage of the federal poverty level [FPL]): Below 
135 percent[A]; 
Assets: Individuals: Below $7,790[B]; Couples: Below $12,440[B]; 
Premium: $0[C]; 
Annual deductible: $0; 
Beneficiary pays for each prescription: During initial coverage period: 
$2.25/generic; $5.60/brand-name; 
Beneficiary pays for each prescription: In coverage gap: $2.25/generic; 
$5.60/brand-name; 
Beneficiary pays for each prescription: After coverage gap: $0. 

Annual income (percentage of the federal poverty level [FPL]): Below 
135 percent[A]; 
Assets: Individuals: Between $7,790 and $11,990[B]; Couples: Between 
$12,440 and $23,970[B]; 
Premium: $0[C]; 
Annual deductible: $56; 
Beneficiary pays for each prescription: During initial coverage period: 
15% coinsurance; 
Beneficiary pays for each prescription: In coverage gap: 15% 
coinsurance; 
Beneficiary pays for each prescription: After coverage gap: 
$2.25/generic; $5.60/brand name. 

Annual income (percentage of the federal poverty level [FPL]): Greater 
than or equal to 135 percent[A] and less than 150 percent[A]; 
Assets: Individuals: Below $11,990[B]; Couples: Below $23,970[B]; 
Premium: Varies by income level[D]; 
Annual deductible: $56; 
Beneficiary pays for each prescription: During initial coverage period: 
15% coinsurance; 
Beneficiary pays for each prescription: In coverage gap: 15% 
coinsurance; 
Beneficiary pays for each prescription: After coverage gap: 
$2.25/generic; $5.60/brand name. 

Source: GAO analysis of CMS regulations and guidance. 

Notes: This table describes the assistance that is provided to LIS 
recipients who applied and qualified for the LIS. 

[A] In 2008, 135 percent of the FPL is $14,040 for individuals and 
$18,900 for couples, and 150 percent of the FPL is $15,600 for 
individuals and $21,000 for couples. These income limits 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] Asset limits are reduced by $1,500 for individuals or $3,000 for 
couples if beneficiaries do not intend to use any of their assets for 
funeral or burial expenses. 

[C] Assumes that beneficiaries are enrolled in a Part D plan with a 
premium less than or equal to the benchmark premium for their area. The 
benchmark premium for each region is based on a weighted average of the 
premiums for basic prescription drug coverage charged by the Part D 
plans available in the region. A beneficiary also can choose to enroll 
in a plan with a premium higher than the benchmark premium and pay the 
difference between the two. 

[D] Beneficiaries pay an amount equal to the plan's premium less the 
premium subsidy to which they are entitled based on their income. The 
subsidy is 100 percent of the plan's premium subsidy amount if a 
beneficiary's income is at or below 135 percent of the applicable FPL, 
75 percent if it is greater than 135 percent but less than or equal to 
140 percent of the FPL, 50 percent if it is greater than 140 percent 
but less than or equal to 145 percent of the FPL, and 25 percent if it 
is greater than 145 percent and less than 150 percent of the FPL. Part 
D plans are offered in 34 designated regions made up of single states 
or groups of states. The premium subsidy amount for a regional Part D 
plan is equal to the lesser of the following two amounts: (1) in the 
case of a plan other than a Medicare Advantage drug plan, the plan's 
monthly Part D premium for basic prescription drug coverage or the 
portion of the premium attributable to such coverage for a plan that 
has enhanced alternative coverage or the Medicare Advantage monthly 
prescription drug premium for those in a Medicare Advantage plan, or 
(2) the greater of the low-income benchmark premium amount for a PDP 
region or the lowest premium for a prescription drug plan that offers 
basic prescription drug coverage in the PDP region. 

[End of table] 

Recipients of the LIS pay a small deductible or none at all and are not 
subject to the coverage gap--they pay the same copayment or coinsurance 
for each prescription until their total expenditures reach the 
catastrophic threshold ($5,726 in 2008). Those with incomes less than 
135 percent of the FPL and assets less than $7,790 in 2008 for 
individuals, or $12,440 for couples, pay no deductible. They pay a flat 
amount for each prescription until their spending reaches the annual 
catastrophic threshold, after which they pay nothing. Other LIS 
recipients pay a deductible not exceeding $56. They pay 15 percent 
coinsurance for each prescription or the plan's copayment, whichever is 
less, until their spending reaches the annual catastrophic threshold. 
From there on, they pay $2.25 for a generic drug and $5.60 for a brand 
name drug. 

Applying for the LIS: 

Beneficiaries generally apply to SSA for the LIS.[Footnote 17] The 
application can be completed by the applicant, completed with the 
assistance of SSA staff in person or by phone, or completed on the 
Internet.[Footnote 18] Applicants are asked an initial screening 
question about their assets (Question 3 on the application, see fig. 
2): whether their savings, investments, and real estate (other than 
their home) are worth more than $11,990, or, if married and living with 
their spouse, whether their combined assets are worth more than 
$23,970.[Footnote 19] If applicants check "YES," they are denied the 
LIS; if they check "NO or NOT SURE," they are asked a series of 
detailed questions about their assets and income.[Footnote 20] The 
questions about assets cover: (1) bank accounts (checking, savings, and 
certificates of deposit); (2) stocks, bonds, savings bonds, mutual 
funds, Individual Retirement Accounts, and other investments; (3) any 
other cash; (4) life insurance policies with a total face value greater 
than $1,500; and (5) real estate other than the applicant's home. 
Applicants are also asked if they plan to use any of their assets for 
funeral expenses and, if they answer yes, $1,500 of their assets are 
disregarded ($3,000 for couples). The detailed questions about income 
cover: (1) Social Security benefits; (2) railroad retirement; (3) 
veterans' benefits; (4) other pensions and annuities; (5) other income 
including alimony, net rental income, and workers' compensation; and 
(6) assistance with household expenses from anyone (for example, from a 
relative or friend). Applicants are approved for the LIS only if both 
their assets and incomes are less than the thresholds established by 
law. Because some applicants were denied the LIS based on their 
checking the "YES" box on the initial screening question about assets 
and were not required to answer questions about their income, we cannot 
know how many of these applicants would have also failed to qualify for 
the LIS on the basis of their income. Further, it is not known how many 
applicants may have been dissuaded from submitting an application due 
to the detailed nature of the information they must provide about their 
income and assets. 

Figure 2: Low-Income Subsidy Application Paths: 

[See PDF for image] 

This figure is an illustration of low-income subsidy application paths, 
as follows: 

Applied for LIS: 
Initial assets screen: 
If you are married and living with your spouse, do you have savings, 
investments or real estate worth more than $23,970? If not married or 
you don't live with your spouse, do you have savings, investments or 
real estate worth more than $11,990? Do not include the home you live 
in, vehicles, personal possessions, burial plots or irrevocable burial 
contracts. 

In you placed an "X" in the yes box, stop. You are not eligible for the 
extra help and you do not need to return this application to us. If you 
need a letter stating you are not eligible, sing the application on 
page 6 and return in to us. Assets are above the threshold: denied. 

If you placed an "X" in the no or not sure box, complete the erst of 
the application and return it to us. 

Itemized assets and income are compared to thresholds: 

Assets above the threshold, but income below the threshold: denied. 

Income above the threshold, but assets below the threshold: denied. 

Both income and assets above the threshold: denied. 

Both income and assets below threshold: approved. 

Source: GAO analysis of SSA information. 

[End of figure] 

SSA does not rely solely on the information on the application, but 
also checks its own databases and those of other agencies, including 
the Internal Revenue Service. If it identifies discrepancies between 
the information on the application and in the databases, SSA may 
request additional information from an applicant. 

Assets and Income Were Important Factors in LIS Denials: 

Both assets and income were important factors in LIS denials, but more 
applicants were denied the subsidy because their income was too high 
than were denied it because their assets were too high. However, 
because some applicants were denied the LIS based solely on the initial 
assets screening question, and were not required to answer questions 
about their income, it is not possible to know how many of these 
applicants would have also been denied the LIS because of their income. 
In both 2006 and 2007, of those beneficiaries who were denied the LIS 
and who answered detailed questions about their assets, more than one 
in four exceeded the assets threshold by less than $5,000. Overall, 
more than half of the applicants for the subsidy in 2006 were denied it 
in calendar year 2006 and about 56 percent were denied it in fiscal 
year 2007. 

Assets Were Less Important as Basis for Denial Than Income in Both 2006 
and 2007: 

In 2006 and 2007, assets and income were both an important basis for 
denying the LIS, but income accounted for a larger number of denials in 
both years. In 2006, 50.4 percent of all denials were due at least in 
part to assets; by contrast, 66.2 percent were based at least in part 
on income. (See figure 3.) In 2006, 22.2 percent of LIS denials 
resulted from the answer to the initial screening question, which asked 
about assets. Because these applicants were not required to answer 
questions about income, it is impossible to know how many of them would 
also have been denied the LIS because of their income. However, a 
minimum of 11.6 percent of 2006 denials were due entirely to assets. In 
2007, the difference between income-based denials and asset-based 
denials increased: 29.5 percent of denials were due at least in part to 
assets, while 81.2 percent were due at least in part to income. 
Overall, more than half of the 4.5 million applicants for the subsidy 
in 2006 were denied it in calendar year 2006 and about 56 percent were 
denied it in fiscal year 2007. 

Figure 3: Basis for Denial of the LIS for Applicants Denied Due to 
Assets and Income by Percentage of Denied Applicants, 2006 and 2007: 

[See PDF for image] 

Year: 2006; 
Initial assets screening question[A]: 22.2%; 
Assets, but not income: 11.6%; 
Both income and assets: 16.6%; 
Income, but not assets: 49.6%; 
Total: 100%; 
Number of persons: 2,252,412. 

Year: 2007; 
Initial assets screening question[A]: 7.1%; 
Assets, but not income: 11.7%; 
Both income and assets: 10.7%; 
Income, but not assets: 70.5%; 
Total: 100%; 
Number of persons: 366,183. 

Year: 2006; 
Assets in part or solely: 50.4%; 
Income in part or solely: 66.2%. 

Year: 2007; 
Assets in part or solely: 29.5%; 
Income in part or solely: 81.2%. 

Source: GAO analysis of SSA data. 

Notes: For 2006, this table excludes 233,728 applicants (9.4 percent of 
denials) who were denied the LIS because they were not Medicare 
beneficiaries, not U.S. residents, or failed to cooperate (meaning that 
they did not follow up with SSA by submitting necessary documentation). 
In 2007, 50,310 applicants (12.1 percent of denials) were excluded for 
these reasons. In addition, the data for 2007 include some applicants 
who applied for the LIS in the last quarter of 2007 and whose 
applications were held over into January 2008 for determination of 
whether they were eligible to receive the LIS in 2008. 

[A] When the response to the initial screening question about assets 
(Question 3 on the application) indicates assets greater than the 
threshold, the applicant does not need to provide income information. 

[End of figure] 

Denials Often Exceeded Asset Threshold by Relatively Small Amount: 

In both 2006 and 2007, a number of applicants who were denied the LIS 
in part because of their assets, and who reported the actual amount of 
their assets, exceeded the threshold by a relatively small amount. For 
example, in 2006, 3.6 percent of these denials exceeded the asset 
threshold by less than $500; 10.4 percent exceeded the threshold by 
less than $1,500; and 26.0 percent exceeded the threshold by less than 
$5,000. (See fig. 4.) In 2007, the pattern was similar: 5.0 percent 
exceeded the asset threshold by less than $500, 12.4 percent by less 
than $1,500, and 26.9 percent by less than $5,000. 

Figure 4: Percentage of Applicants Who Exceeded the Assets Threshold, 
by Amount over the Threshold, 2006 and 2007: 

[See PDF for image] 

This figure is a multiple vertical bar graph depicting the following 
data: 

Assets over the threshold: less than $500; 
Year: 2006: 3.6%; 
Year: 2007: 5%. 

Assets over the threshold: $500 to less than $1,000; 
Year: 2006: 3.6%; 
Year: 2007: 4.1%. 

Assets over the threshold: $1,000 to less than $1,500; 
Year: 2006: 3.2%; 
Year: 2007: 3.3%. 

Assets over the threshold: $1,500 to less than $3,000; 
Year: 2006: 7.6%; 
Year: 2007: 6.9%. 

Assets over the threshold: $3,000 to less than $5,000; 
Year: 2006: 8%; 
Year: 2007: 7.6%. 

Assets over the threshold: $5,000 to less than $10,000; 
Year: 2006: 13.7%; 
Year: 2007: 12.5%. 

Assets over the threshold: $10,000 to less than $20,000; 
Year: 2006: 18.6%; 
Year: 2007: 17.7%. 

Assets over the threshold: $20,000 to less than $30,000; 
Year: 2006: 10.1%; 
Year: 2007: 9.3%. 

Assets over the threshold: $30,000 to less than $40,000; 
Year: 2006: 6.8%; 
Year: 2007: 6.8%. 

Assets over the threshold: $40,000 to less than $50,000; 
Year: 2006: 4.8%; 
Year: 2007: 4.4%. 

Assets over the threshold: $50,000 or more; 
Year: 2006: 20%; 
Year: 2007: 22.4%. 

Source: GAO analysis of SSA data. 

[End of figure] 

Some State and Drug Manufacturer Programs Help Beneficiaries, but 
Provide Uneven Access to Prescription Drugs: 

Some state and drug manufacturer programs provide assistance to 
Medicare beneficiaries with limited income in obtaining drugs, but they 
do not provide uniform national access to prescription drugs. State 
Pharmaceutical Assistance Programs (SPAP) can fill gaps in low-income 
individuals' Part D coverage, but less than half of the states have 
SPAPs. The eligibility requirements for these programs vary, as does 
the type and extent of assistance provided. Pharmaceutical 
manufacturers sponsor Patient Assistance Programs (PAP) that provide 
assistance to low-income individuals, but not all are open to Medicare 
beneficiaries, and the drugs they provide are limited to those produced 
by the sponsor. 

SPAPs Offer Assistance to Medicare Beneficiaries with Limited Incomes, 
but Access Is Uneven: 

SPAPs offer financial assistance to low-income Medicare beneficiaries-
-those who receive the LIS and those who do not--in obtaining 
prescription drugs, but these programs are available in only a minority 
of states. Under the MMA, SPAPs--which generally predate Part D--can 
offer wrap-around benefits that fill in gaps in Part D and cover some 
or all of the beneficiary's out-of-pocket expenditures. To qualify as 
an SPAP under Part D, the program must coordinate payments and payment 
processing with the Part D plans in which their beneficiaries are 
enrolled.[Footnote 21] Expenses paid by a qualified SPAP are counted 
toward the enrolled beneficiary's TrOOP costs. 

Fewer than half of all states have SPAPs that are open to enrollment by 
low-income Medicare beneficiaries.[Footnote 22] As of October 2007, 23 
states offered 37 qualified SPAPs to assist Medicare beneficiaries in 
paying their Part D costs. (See fig. 5.) Twenty of the 37 programs 
serve broadly defined populations. Broadly defined SPAPs require 
applicants to be state residents and meet eligibility requirements with 
respect to age and financial resources, but do not require an applicant 
to have been diagnosed with a specific disease or condition. Fourteen 
of the remaining programs assist special populations of individuals who 
have specific diseases or conditions, such as HIV-AIDS.[Footnote 23] 

Figure 5: Geographic Distribution of SPAPs, 2007: 

[See PDF for image] 

This figure is a map of the United States depicting the geographic 
distribution of SPAPs in 2007 in four categories as follows: 

States with SPAPs that assist a broadly defined population: 
Connecticut: 
Illinois: 
Indiana: 
Maine: 
Massachusetts: 
Missouri: 
Montana: 
New Jersey: 
New York: 
Rhode Island: 
South Carolina: 
Vermont: 

States with SPAPs that assist individuals with particular diseases or 
conditions: 
Colorado: 
Texas: 
Virginia: 

States with both types of SPAPs: 
Delaware: 
Maryland: 
Nevada: 
North Carolina[A]: 
Pennsylvania: 
Wisconsin: 

States without an SPAP: 
Alabama: 
Alaska: 
Arizona: 
Arkansas: 
California: 
District of Columbia: 
Florida: 
Georgia: 
Hawaii: 
Idaho: 
Iowa: 
Kansas: 
Kentucky: 
Louisiana: 
Michigan: 
Minnesota: 
Mississippi: 
Nebraska: 
New Hampshire: 
New Mexico: 
North Dakota: 
Ohio: 
Oklahoma: 
Oregon: 
South Dakota: 
Tennessee: 
Utah: 
Washington: 
West Virginia: 
Wyoming: 

[A] State with an SPAP that requires an asset test. 

Source: GAO analysis of data from CMS, National Pharmaceutical Council, 
and SPAPs; Map Resources (map). 

[End of figure] 

States establish their own eligibility standards for SPAPs. All 20 
SPAPs that serve a broadly defined population have an income test, but 
only one, North Carolina's,[Footnote 24] has an asset test. All but one 
of these programs, Pennsylvania's Pharmaceutical Assistance Contract 
for the Elderly (PACE), have income limits that exceed the LIS income 
threshold, which is less than 150 percent of the FPL. (See fig. 6.) 
Most SPAPs have income limits set at or above 200 percent of the FPL, 
and three have limits that exceed 300 percent of the FPL. In four 
cases, the income limits are set so that benefits are graduated-- 
enrollees with higher incomes receive less assistance that those with 
lower incomes. 

Figure 6: Income Eligibility Requirements as a Percentage of the 
Federal Poverty Level for SPAPs That Assist Broadly Defined 
Populations, 2007: 

[See PDF for image] 

This figure is a a vertical bar graph depicting the following data: 

LIS income limit for partial coverage is 150% of FPL. 

State with qualified SPAPs: Massachusetts; 
Percentage of FPL: 500%. 

State with qualified SPAPs: Rhode Island; 
Percentage of FPL: 403%. 

State with qualified SPAPs: New York; 
Percentage of FPL: 343%. 

State with qualified SPAPs: Maryland; 
Percentage of FPL: 300%. 

State with qualified SPAPs: Wisconsin; 
Percentage of FPL: 240%. 

State with qualified SPAPs: Nevada; 
Percentage of FPL: 236%. 

State with qualified SPAPs: Pennsylvania (PACENET); 
Percentage of FPL: 230%. 

State with qualified SPAPs: Pennsylvania (PACE); 
Percentage of FPL: 142%. 

State with qualified SPAPs: Connecticut; 
Percentage of FPL: 226%. 

State with qualified SPAPs: Vermont; 
Percentage of FPL: 225%. 

State with qualified SPAPs: Illinois; 
Percentage of FPL: 223%. 

State with qualified SPAPs: New Jersey (PAAD); 
Percentage of FPL: 221%. 

State with qualified SPAPs: New Jersey (Senior Gold); 
Percentage of FPL: 319%. 

State with qualified SPAPs: Delaware; 
Percentage of FPL: 200%. 

State with qualified SPAPs: Missouri; 
Percentage of FPL: 200%. 

State with qualified SPAPs: Montana; 
Percentage of FPL: 200. 

State with qualified SPAPs: South Carolina; 
Percentage of FPL: 198%. 

State with qualified SPAPs: Maine; 
Percentage of FPL: 185%. 

State with qualified SPAPs: North Carolina; 
Percentage of FPL: 175%. 

State with qualified SPAPs: Indiana; 
Percentage of FPL: 152%. 

Source: GAO analysis of data from CMS, National Pharmaceutical Council, 
and SPAPs. 

Notes: In all cases, the figure shows the highest income limit for a 
single person in each SPAP. In four SPAPs, benefits are graduated so 
that persons with relatively higher incomes receive a smaller benefit 
than those with lower incomes. 

Income requirements are for individuals. For SPAPs that have different 
income limits for different categories of individuals (for example, 
aged and disabled), the highest income limit is shown. 

[End of figure] 

Many SPAPs also require Medicare beneficiaries to apply for the LIS. As 
of October 2007, over half of the 20 SPAPs that serve broadly defined 
populations required applicants who were potentially eligible for the 
LIS to apply for it in conjunction with applying for assistance from 
the state. By identifying individuals eligible for the LIS, the cost to 
the state is reduced because Medicare pays for some prescription drug 
costs that would otherwise be paid by the SPAP. 

The assistance that broadly defined SPAPs provide to Part D enrollees 
is uneven and varies in three ways: (1) the types of Part D costs for 
which SPAPs may provide financial assistance; (2) the amount of 
financial assistance they provide in each case; and (3) the drugs they 
pay for that are not otherwise covered by a Part D plan. Part D costs 
for which SPAPs may provide assistance include monthly plan premiums, 
the annual deductible, and copayments (in the initial coverage period 
and in the coverage gap).[Footnote 25] While 8 of the 20 SPAPs that 
assist broadly defined populations provide some assistance for all four 
types of Part D costs, the others assist Part D enrollees with one or 
more of these costs. (See table 2.) 

Broadly defined SPAPs differ in the amount of assistance they provide 
for Part D premiums, deductibles, and copayments. Eleven of the 20 
qualified SPAPs that serve a broadly defined population cover the full 
Part D premium for at least some enrollees,[Footnote 26] and 6 SPAPs 
offer no assistance with the premium. Programs also vary in the portion 
of the copayment they pay in both the initial coverage period and in 
the coverage gap. 

Table 2: Qualified SPAPs Serving Broadly Defined Populations: Coverage 
for Medicare Beneficiaries, 2007: 

State: Connecticut; 
Premiums: Full Payment; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Delaware; 
Premiums: Full Payment; 
Deductibles: Partial Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Illinois; 
Premiums: Full Payment[A]; 
Deductibles: Full Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Indiana; 
Premiums: Full Payment[A]; 
Deductibles: No Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: No Payment. 

State: Maine; 
Premiums: Full Payment[A]; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Maryland; 
Premiums: Partial Payment; 
Deductibles: No Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: No Payment. 

State: Massachusetts[B]; 
Premiums: Full Payment[A]; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Missouri; 
Premiums: No Payment; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Montana; 
Premiums: Full Payment[A]; 
Deductibles: No Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: No Payment. 

State: Nevada; 
Premiums: Full Payment[A]; 
Deductibles: No Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: Full Payment. 

State: New Jersey (PAAD); 
Premiums: Full Payment[A]; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: New Jersey (Senior Gold); 
Premiums: No Payment; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: New York; 
Premiums: Full Payment[A]; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: North Carolina; 
Premiums: Partial Payment; 
Deductibles: No Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: ô. 

State: Pennsylvania (PACE); 
Premiums: Full Payment; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Pennsylvania (PACENET); 
Premiums: No Payment; 
Deductibles: Partial Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Rhode Island[B]; 
Premiums: No Payment; 
Deductibles: Partial Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: Partial Payment. 

State: South Carolina; 
Premiums: No Payment; 
Deductibles: No Payment; 
Co-pay: No Payment; 
During Part D Coverage Gap: Partial Payment. 

State: Vermont[B]; 
Premiums: Partial Payment; 
Deductibles: Full Payment; 
Co-pay: Full Payment; 
During Part D Coverage Gap: Full Payment. 

State: Wisconsin[B]; 
Premiums: No Payment; 
Deductibles: Full Payment; 
Co-pay: Partial Payment; 
During Part D Coverage Gap: Partial Payment. 

Source: GAO analysis of CMS and National Pharmaceutical Council data. 

Legend: 

Full Payment--SPAP pays all of this expense for qualifying individuals, 
resulting in zero out-of-pocket expenses for a beneficiary. 

Partial Payment--SPAP pays a portion of this expense for qualifying 
individuals, resulting in some out-of-pocket expenses for a 
beneficiary. 

No Payment--SPAP does not cover this expense, resulting in 100 percent 
out-of-pocket expense for a beneficiary. 

Notes: The data are from CMS's list of Qualified State Pharmaceutical 
Assistance Programs under the MMA (available at [hyperlink, 
http://www.cms.hhs.gov/States/07_SPAPs.asp#TopOfPage], downloaded Oct. 
15, 2007) and the National Pharmaceutical Council's Pharmaceutical 
Benefits Under State Medical Assistance Programs, 2007 (Reston, Va., 
2007). 

SPAP qualification criteria may include meeting an income threshold or 
enrolling in designated prescription drug programs. 

[A] The SPAP pays the premium for any plan with a premium less than or 
equal to the benchmark premium. Part D plans are offered in 34 
designated regions made up of single states or groups of states. The 
benchmark premium for each region is calculated annually based on a 
weighted average of the premiums charged by the Part D plans available 
in the region. 

[B] The SPAP provides a graduated benefit based on a beneficiary's 
income level. 

[End of table] 

In addition to assistance with Medicare Part D drug costs, many SPAPs 
pay for classes of drugs not covered by Medicare Part D. Some programs 
also pay for drugs not covered by a particular Part D plan (often 
referred to as nonformulary drugs).[Footnote 27] 

Manufacturers' Patient Assistance Programs Help Some Low-income 
Medicare Beneficiaries, but Program Features Vary: 

Pharmaceutical manufacturers provide prescription drug assistance to 
some low-income individuals, including Part D beneficiaries, through 
Patient Assistance Programs (PAP).[Footnote 28] These programs, which 
are operated by the manufacturer or an independent charitable 
organization, provide prescription drugs free or at a reduced price. 
Individual program features, including the application process, 
eligibility requirements, and drugs offered, vary. PAPs typically 
assist individuals who have chronic illnesses and high drug costs. 
Unlike SPAPs, these programs are national in scope. However, the drugs 
they provide are limited to those produced by the sponsoring 
manufacturer and some manufacturers may not make all their drugs 
available.[Footnote 29] 

PAPs typically require beneficiaries to demonstrate financial need, be 
residents or citizens of the United States, and have no prescription 
drug insurance coverage other than Part D. An applicant's income 
usually must fall below 200 percent of the FPL to qualify for 
assistance,[Footnote 30] although some PAPs have higher limits. Many 
PAPs, however, do not publish their income eligibility standards. In 
the case of financial hardship, some PAPs evaluate individuals on a 
case by case basis. 

PAPs generally operate outside of Part D, meaning that beneficiaries 
can obtain prescription drugs without using their Part D insurance 
benefit.[Footnote 31] Drugs provided to Medicare beneficiaries by PAPs 
operating outside of Part D do not count against TrOOP costs, but 
nominal copayments charged by some programs may. Part D plans use data 
from the PAPs to ensure that drugs the programs provide beneficiaries 
do not count against their TrOOP and to enable Part D plans to address 
safety concerns associated with prescription drugs provided outside of 
Part D. CMS maintains a Web site that provides information on drugs 
available to Medicare beneficiaries through 47 PAPs, including PAPs 
representing 9 of the 10 largest pharmaceutical companies. 

The process for accessing PAPs and their drugs varies considerably. 
Many PAPs make application forms available on the Internet, while 
others require that applications be requested by phone, and some PAPs 
may screen for eligibility before sending out an application. Some PAPs 
that offer more than one product allow applicants to receive more than 
one drug at a time, whereas others have separate applications for each 
drug. 

The degree of physician involvement in the application process also 
varies across PAPs. Patients often learn about the programs from a 
physician and, in many cases, a physician or patient advocate completes 
the application on behalf of the patient. In other cases, the patient 
can complete and submit the application, but the physician's signature 
is required. 

Individuals typically receive a 30-day to 180-day supply of drugs after 
their applications are approved. The drugs are generally sent to a 
clinic or doctor's office, although some PAPs mail drugs directly to 
the individuals or give them a voucher that can be redeemed at a 
pharmacy. The number of refills allowed also varies, with some PAPs 
requiring individuals to submit a new application for each refill. 

Concluding Observations: 

We have shown that in 2006 and 2007 income was a more important factor 
in LIS denials than assets, but both were important. Whether or not 
there should be an asset test in addition to the income test is an 
issue that cannot be resolved by analysis. Those beneficiaries who do 
not qualify for the LIS because their assets are above the program 
threshold, but whose incomes are limited, may obtain access to drugs 
through 23 state programs and through drug manufacturer programs. 
However, the availability of these programs and the assistance they 
offer are uneven, and they do not provide the coverage obtained through 
a national program with uniform eligibility standards. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to CMS (see app. II) and SSA (see 
app. III). CMS concurred with our report and its concluding 
observations. SSA expressed appreciation that we used its analysis of 
applicants denied the LIS in 2006 and 2007 as the foundation of our 
analysis of the impact of the assets test on LIS applicants. Both 
agencies provided technical comments that we incorporated where 
appropriate. 

We are sending copies of this report to the Acting Administrator of CMS 
and the Commissioner of Social Security. We will also provide copies to 
others on request. In addition, this report is available at no charge 
on the GAO Web site at [hyperlink, http://www.gao.gov]. 

If you or your staff have questions about this report, please contact 
me at (202) 512-7114 or steinwalda@gao.gov. Contact points for our 
Offices of Congressional Relations and Public Affairs may be found on 
the last page of this report. GAO staff who made key contributions to 
this report are listed in appendix IV. 

Signed by: 

A. Bruce Steinwald: 
Director, Health Care: 

List of Committees: 

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

The Honorable John D. Dingell: 
Chairman: 
The Honorable Joe L. Barton: 
Ranking Member: 
Committee on Energy and Commerce: 
House of Representatives: 

The Honorable Charles B. Rangel: 
Chairman: 
The Honorable Jim McCrery: 
Ranking Member: 
Committee on Ways and Means: 
House of Representatives: 

The Honorable Frank J. Pallone, Jr. 
Chairman: 
The Honorable Nathan Deal: 
Ranking Member: 
Subcommittee on Health: 
Committee on Energy and Commerce: 
House of Representatives: 

The Honorable Pete Stark: 
Chairman: 
The Honorable Dave Camp: 
Ranking Member: 
Subcommittee on Health: 
Committee on Ways and Means: 
House of Representatives: 

[End of section] 

Appendix I: Social Security Administration Application for the Low- 
Income Subsidy, 2008: 

Social Security Administration: 
Important Information: 

You may be eligible to get extra help paying for your prescription 
drugs. 

The Medicare Prescription Drug program gives you a choice of 
prescription plans that offer various types of coverage. 

You may he able to get extra help to pay for the monthly premiums, 
annual deductibles, and co-payments related to the Medicare 
Prescription Drug program. 

But before we can help you, you must fill out the application, put it 
in the enclosed envelope and mail it today. Or you may complete an 
online application at [hyperlink, http://www.socialsecurity.gov]. We 
will review your application and send you a letter to let you know if 
you qualify for extra help. To use the extra help, you must enroll in a 
Medicare Prescription Drug plan. 

If you need help completing the application, call Social Security at 1-
800-772-1213 (TTY 1-800-325-0778). You can find more information at 
[hyperlink, http://www.socialsecurity.gov]. 

If you need information about Medicare Prescription Drug plans or how 
to enroll in a plan, call 1-800-MEDICARE (TTY 1-877-486-2048) or visit 
[hyperlink, http://www.medicare.gov]. 

Mail your application today. We will give you a decision about whether 
you qualify for the extra help. 

Signed by: 

Michael J. Astrue: 
Commissioner: 

General Instructions for Completing the Application for Help with 
Medicare Prescription Drug Plan Costs: 

Do you or the person you are helping apply have Medicare and 
Supplemental Security Income (SSI) or Medicare and Medicaid?
If the answer is yes, do not complete this application because you 
automatically will get the extra help. 

Does your state Medicaid program pay your Medicare premiums because you 
belong to a Medicare Savings Program? 

If the answer is yes, contact your state Medicaid office for more 
information. You could get the extra help automatically and may not 
need to complete this application. 

How To Complete This Application: 
* Use black ink only;
* Keep your numbers, letters and X's inside the boxes; use only capital 
letters;
* Do not add any handwritten comments on the application;
* Do not use dollar signs when entering money amounts; and; 
* Cents can be rounded to the nearest whole dollar. 

Example: 
Place an X in the box. Do not fill in or use check marks in boxes.
Use capital letters when entering answers. 

If You Are Assisting Someone Else With This Application: 

Answer the questions as if that person were completing the application. 
You must know that person's Social Security number and financial 
information. Also, complete Section B on page 6. 

Completing Your Application: 

You may complete the online application at [hyperlink, 
http://www.socialsecurity.gov] or use the enclosed pre-addressed 
stamped envelope to return your completed and signed application to: 

Social Security Administration: 
Wilkes-Barre Data Operations Center: 
P.O. Box 1020: 
Wilkes-Barre, PA 18767-9910: 

Return this application package in the enclosed envelope. Do not 
include anything else in the envelope. If we need more information, we 
will contact you. 

If You Have Questions Or Need Help Completing This Application: 

You can call us toll-free at 1-800-772-1213, or if you are deaf or hard 
of hearing, you may call our TTY number, 1-800-325-0778. 

Application for Help with Medicare Prescription Drug Plan Costs: 

This Does Not Enroll You In A Medicare Prescription Drug Plan.	 

State code: 
Exception: 

1. Applicant's Name: Print name as it appears on your Social Security 
card. Use one box for each letter. 

First Name: 
MI: 
Last name: 
Suffix: 
Applicant's Social Security Number: 
Applicant's Date of Birth: 

2. If you are married and living with your spouse, please provide the 
following information as it appears on your spouse's Social Security 
card. If you are not currently married or do not live with your spouse, 
skip to question 3 and do not include any information about your spouse 
on this application. 

First Name: 
MI: 
Last name: 
Suffix: 
Spouse's Social Security Number: 
Spouse's Date of Birth: 

If your spouse has Medicare, does he or she also wish to apply for the 
extra help?
Yes: 
No: 

3. If you are married and living with your spouse, do you have savings, 
investments or real estate worth more than $23,970? If not married or 
you don't live with your spouse, do you have savings, investments or 
real estate worth more than $11,990? Do not include the home you live 
in, vehicles, personal possessions, burial plots or irrevocable burial 
contracts. 

Yes: If you place an "X" in the yes box, stop. You are not eligible for 
the extra help and you do not need to return this application to us. If 
you need a letter stating you are not eligible, sign the application on 
page 6 and return it to us. 

No Or Not Sure: If you place an in the no or not sure box, complete the 
rest of this application and return it to us. 

If you placed an "X" in the no or not sure box in question 3, answer 
all of the following questions. If you are married and living with your 
spouse, you must answer all of the questions for both of you. 

4. Please enter the money amounts of all bank accounts, investments or 
cash that either you, your spouse, if married and living together, or 
both of you own in the boxes below. Include items that either of you 
own with another person. Include only the dollar figures, not the 
account number. If you or your spouse do not own an item listed, either 
separately, jointly or with another person, place an "X" in the none 
box. 
Combined total of all bank accounts (checking, savings and certificates	
of deposit): 
None: 

Combined total of all stocks, bonds, savings bonds, mutual funds, 
Individual Retirement Accounts or other similar investments: 
None: 
	
Any other cash at home or anywhere else: 
None: 
			
5. Do you own life insurance policies with a total face value of more 
than $1,500? Answer for you and your spouse if your spouse lives with 
you. If you answer no for both you and your spouse, go to question 6. 

You: 
Yes: 
No: 

Spouse: 
Yes: 
No: 

If you answered yes for either of you, how much money would you get if 
you turned in your policies for cash right now? Enter the amount. If 
you answered yes for both you and your spouse, enter the combined 
amount. This is not the face value of your policies. You may need to 
call your insurance company to help answer this question. 

Amount: 

6. Will some money from the sources listed in questions 4 and 5 be used 
to pay for funeral or burial expenses? If yes, skip to question 7. If 
NO, place an "X" in the no box, then go to question 7.	
You: 
No: 

Spouse: 
No: 

7. Other than your home and the property on which it is located, do you 
or your spouse, if married and living together, own any real estate? 
Examples of other real estate are summer homes, rental properties or 
undeveloped land you own. 
Yes: 
No: 

8. Not counting your spouse if you are married, how many other 
relatives live in your household and receive at least one-half of their 
financial support from you or your spouse? We count relatives related 
to you by blood, marriage or adoption. 

Place an "X" in only one box. Do not include yourself or your spouse in 
the number you enter. If your household consists only of you or you and 
your spouse, place an "X" in the None box.
None: 
1: 
2: 
3: 
4: 
5: 
6: 
7: 
8: 
9 or more: 

9. If you or your spouse, if married and living together, receive 
income from any of the sources listed below, please enter the total 
amount you receive each month. If the amount changes from month to 
month or you do not receive it every month, enter the average monthly 
income for the past year for each type in the appropriate boxes. Do not 
list wages and self-employment, interest income, public assistance, 
medical reimbursements or foster care payments here. if you or your 
spouse do not receive income from a source listed below, place an "X" 
in the none box for that source. 

Social Security benefits: 
Monthly Benefit: 
None: 

Railroad Retirement benefits before deductions: 
Monthly Benefit: 
None: 

Veterans benefits before deductions: 
Monthly Benefit: 
None: 

Other pensions or annuities before deductions. Do not include money
you receive from any item you included in question 4: 
Monthly Benefit: 
None: 

Other income not listed above, including alimony, net rental income, 
workers' compensation, etc. (Specify): 
Monthly Benefit: 
None: 

10. Have any of the amounts you included in question 9 decreased during 
the last two years?
Yes: 
No: 

11. Do you count on anyone to help pay for any of the following 
household expenses - food, mortgage, rent, heating fuel or gas, 
electricity, water and property taxes? Do NOT include food stamps, 
house repairs, help from a housing agency, an energy assistance 
program, Meals on Wheels, contributions from food banks, soup kitchens 
or help with medical treatment and drugs. Do not include small amounts 
of money given occasionally or unexpectedly. 
Yes: 
No: 

If you place an "X" in the YES box, enter the monthly amount or, if the 
amount changes from month to month, enter the average monthly amount 
for the past year. 

If you have worked in the last two years, you need to answer questions 
12-16. If you are married and living with your spouse and either one of 
you has worked in the last two years, you need to answer questions 12-
16. Otherwise, sign the application on page 6 and return it to us. 

12. What do you expect to earn in wages before taxes and deductions 
this calendar year?
You: 
Amount: 
None: 

Spouse: 
Amount: 
None: 

13. What do you expect your net earnings from self-employment to be 
this calendar year?
Place an "X" in the none box if you are not self-employed and go to 
question 14. 
You: 
Amount: 
None: 

Spouse: 
Amount: 
None: 

14. Have the amounts you included in questions 12 or 13 decreased in 
the last two years? 
Yes: 
No: 

15. If you or your spouse, stopped working in 2007 or 2008, or plan to 
stop working in 2008 or 2009, enter the month and year: 
You: 
Month: 
Year: 

Spouse: 
Month: 
Year: 

If you are younger than age 65, answer question 16. If you are married 
and living with your spouse and either one of you is younger than age 
65, answer question 16. Otherwise, sign the application on page 6 and 
return it to us. 

16. Do you or your spouse have to pay for things that enable you to 
work? We will count only a part of your earnings toward the income 
limit if you work and receive Social Security benefits based on a 
disability or blindness and you have work-related expenses for which 
you are not reimbursed. Examples of such expenses are: the cost of 
medical treatment and drugs for AIDS, cancer, depression or epilepsy; a 
wheelchair; personal attendant services; vehicle modifications. driver
assistance or other special work-related transportation needs; work-
related assistive technology; guide dog expenses; sensory and visual 
aids; and Braille translations. 
You: 
Yes: 
No: 

Spouse: 
Yes: 
No: 

Signatures: 

Important Information - Please Read Carefully: 

I/We understand that the Social Security Administration (SSA) will 
check my/our statements and compare its records with records from 
Federal, State, and local government agencies. including the Internal 
Revenue Service (IRS) to make sure the determination is correct. 

By submitting this application, I am/we are authorizing SSA to obtain 
and disclose information related to my/our income, resources, and 
assets, foreign and domestic, consistent with applicable privacy laws. 
This information may include, but is not limited to, information about 
my/our wages, account balances, investments, insurance policies, 
benefits, and pensions. 

I/We declare under penalty of perjury that I/we have examined all the 
information on this form and it is true and correct to the best of 
my/our knowledge. 

Please complete Section A. If you cannot sign, a representative may 
sign for you. If someone assisted you, complete Section B as well. 

Section A: 

Your Signature: 
Date:
Phone Number: 

Spouse's Signature: 
Date: 
Phone Number: 
	
Your Mailing Address: 
Apt. #: 
City: 
State: 
Zip Code: 

If you changed your mailing address within the last three months, place 
an "X" here: 

If you would prefer that we contact someone else if we have additional 
questions, please provide the person's name and a daytime phone number. 

Print First Name: 
Print Last Name: 
Phone Number: 

Section B: 

If someone assisted you, place an "X" in the box that describes that 
person and provide the rest of the information requested below. 
Family Member: 
Friend: 
Attorney: 
Agency: 
Other Advocate:	
Social Worker: 
Other, Specify: 

Print First Name:
Print Last Name:
Address:
City: 
State: 
Zip Code: 

Privacy Act/Paperwork Reduction Notice: 

Section 1860 D-14 of the Social Security Act authorizes the collection 
of information requested on this form. The information you provide will 
be used to enable the Social Security Administration to determine if 
you are eligible for help paying your share of the cost of a Medicare 
Prescription Drug Plan. You do not have to give us the information 
requested. However, if you do not provide the information, we will be 
unable to make an accurate and timely decision on your application. We 
may provide information collected on this form to another Federal, 
Stale, or local government agency to assist us in determining your 
eligibility for the extra help or if a Federal law requires the release 
of information. 

We may also use the information you give us when we match records by 
computer. Matching programs compare our records with those of other 
Federal. State, or local government agencies. Many agencies may use 
matching programs to find or prove that a person qualifies for benefits 
paid by the Federal government. The law allows us to do this even if 
you do not agree to it. Explanations about these and other reasons why 
information you provide us may be used or given out are available in 
Social Security offices. If you want to learn more about this, contact 
any Social Security office. 

Paperwork Reduction Act Statement - This information collection meets 
the requirements of 44 U.S.C. § 3507, as amended by section 2 of the 
Paperwork Reduction Act of 1995, You do not need to answer these 
questions unless we display a valid Office of Management and Budget 
control number. We estimate that it will take about 35 minutes to read 
the instructions, gather the facts, and answer the questions. You may 
send comments on our time estimate above to: SSA, 6401 Security Blvd., 
Baltimore, MD 21235-6401. Send only comments relating to our time 
estimate to this address, not the completed form. 

Send The Completed Form To Us At The Address Shown On The Enclosed Pre-
Addressed Envelope: 

Social Security Administration: 
Wilkes-Barre Data Operations Center: 
P.O. Box 1020: 
Wilkes-Barre, PA 18767-9910: 

Form SSA-102OB-OCR-S11 (12-2007): 

[End of section] 

Appendix II: Comments from the Centers for Medicare & Medicaid 
Services: 

Department Of Health & Human Services: 
Office Of The Secretary: 
Assistant Secretary for Legislation: 
Washington, DC 20201: 

August 8, 2008: 

A. Bruce Steinwald: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Steinwald: 

Enclosed are the Departments comments on the U.S. Government 
Accountability Office's (GAO) draft report entitled: "Medicare Part D 
Low Income Subsidy: Assets and Income Are Both Important in Subsidy 
Denials, and Access to State and Manufacturer Drug Programs Is Uneven" 
(GAO 08-824). 

The Department appreciates the opportunity to comment on this report 
before its publication. 

Sincerely, 

Signed by: 

Jennifer R. Luong, for: 

Vincent J. Ventimiglia, Jr. 
Assistant Secretary for Legislation: 

Attachment: 

Department Of Health & Human Services: 
Centers for Medicare and Medicaid Services: 
Administrator: 
Washington, DC 20201: 

Date: August 6, 2088: 

To: Vincent J. Ventimiglia. Jr. 
Assistant Secretary for Legislation: 
Department of Health and Human Services: 

From: [Signed by} Kerry Weems: 
Acting Administrator: 

Subject: Government Accountability Office (GAO) Draft Report: "Medicare 
Part D Low Income Subsidy-s and Income Are Both Important in Subsidy 
Denials, and Access to State and Manufacturer Drug Programs Is Uneven" 
(GAO-08-824): 

Thank you for the opportunity to review and comment on the above draft 
GAO report. the first of two reports on this topic. Under the Medicare 
Part D program, millions of low-income individuals who otherwise would 
have no drug coverage now have access to a generous drug benefit. It 
should not be overlooked that those who do not qualify for the Part D 
low-income subsidy (LIS) still have access to a meaningful and 
affordable prescription drug plan. 

The GAO's report indicates that, in 2006 and 2007. more than half of 
the individuals who applied for the LIS under the Medicare Part D 
prescription drug benefit program were denied. While assets and income 
were both important factors in these denials, income was of greater 
importance. The GAO further reports that both State Pharmaceutical 
Assistance Programs and drug manufacturers' Patient Assistance Program 
assist low income individuals in obtaining prescription drugs, but that 
coverage is limited and non-uniform. 

The Centers for Medicare & Medicaid Services (CMS) concurs with the 
report and its concluding observations, and believes the information in 
the report will be useful as we continue to work with our partners and 
reach out to potential LIS eligibles. 

[End of section] 

Appendix III: Comments from the Social Security Administration: 

Social Security: 
The Commissioner: 
Social Security Administration: 
Baltimore, MD 21235-0001: 

August 4, 2008: 

Mr. A. Bruce Steinwald: 
Director, Health Care: 
U.S. Government Accountability Office: 
441 G St., NW: 
Washington, D.C. 20548: 

Dear Mr. Steinwald: 

Thank you for the opportunity to review and comment on the draft 
report, "Medicare Part D Low-Income Subsidy: Assets and Income Are Both 
Important in Subsidy Denials, and Access to State and Manufacturer Drug 
Programs Is Uneven" (GAO-08-824). 

We appreciate you using our analysis of applicants who received denials 
for Low-Income Subsidy (LIS) in 2006 and 2007 as the foundation for 
your analysis of the impact of the asset test on LIS applicants. 
Enclosed are our suggested technical revisions. 

Please refer any questions concerning our comments to Candace Skurnik, 
Director, Audit Management and Liaison Staff, at (410) 965-4636. 

Sincerely, 

Signed by: 

Michael J. Astrue: 

Enclosure 

[End of section] 

Appendix IV: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

A. Bruce Steinwald, (202) 512-7114 or steinwalda@gao.gov: 

Acknowledgments: 

In addition to the contact above, Phyllis Thorburn, Assistant Director; 
Carolyn Garvey; Drew Long; Maya Tholandi; and Eric Wedum made key 
contributions to this report. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 108-173, § 101, 117 Stat. 2066, 2071. 

[2] Part D drug coverage is available either through stand-alone 
prescription drug plans (PDP) for Medicare beneficiaries in traditional 
fee-for-service Medicare, or through Medicare Advantage prescription 
drug plans for beneficiaries enrolled in Medicare's managed care 
program. The majority of Part D enrollees are in stand-alone PDPs. 

[3] The MMA refers to resources; in this report, we use the term 
assets. The Social Security Administration (SSA) provides the following 
examples of assets: real estate (other than one's primary residence); 
bank accounts, including checking, savings, and certificates of 
deposit; stocks; bonds, including U.S. Savings Bonds; mutual funds; 
individual retirement accounts (IRA); and cash at home or anywhere 
else. 

[4] Applicants can enroll in a Part D plan and subsequently apply for 
the LIS, or they may apply for the LIS first. See 42 U.S.C. § 1860D- 
14(a)(3). 

[5] The LIS determination for both income and assets is updated 
annually by increases in the Consumer Price Index. 

[6] The MMA permits beneficiaries to apply to their state Medicaid 
programs for the LIS, but few do so. See GAO, Medicare Part D Low- 
Income Subsidy: Additional Efforts Would Help Social Security Improve 
Outreach and Measure Program Effects, [hyperlink, 
http://www.gao.gov/cgi-bin/getrpt?GAO-07-555] (Washington, D.C.: May 
31, 2007) and Medicare Part D Low-Income Subsidy: SSA Continues to 
Approve Applicants, but Millions of Individuals Have Not Yet Applied, 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-08-812T] (Washington, 
D.C.: May 22, 2008). 

[7] Pub. L. No. 108-173, § 107(e), 117 Stat. 2171. 

[8] Except for qualified disabled and working individuals, dual 
eligible individuals are those who are entitled to Medicare and are 
also eligible for some form of Medicaid benefit. Medicaid is a joint 
federal-state program that finances health care services for certain 
persons with low income. 

[9] The two periods overlap: the last quarter of calendar year 2006 is 
also the first quarter of fiscal year 2007. 

[10] Medicare Part A pays for inpatient hospital stays, care in skilled 
nursing facilities, hospice care, and some home health care. Part B 
pays for doctors' services, outpatient hospital care, durable medical 
equipment, and certain other services, such as physical therapy. 

[11] Plans may require different payments so long as the plan is 
actuarially equivalent to the standard benefit. 

[12] Dollar amounts are subject to annual adjustment to account for the 
increase in expenditures for Part D drugs. 

[13] 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. 

[14] Part D plans are offered in 34 designated regions made up of 
single states or groups of states. The premium subsidy amount for a 
regional Part D plan is equal to the lesser of the following two 
amounts: (1) in the case of a plan other than a Medicare Advantage drug 
plan, the plan's monthly Part D premium for basic prescription drug 
coverage or the portion of the premium attributable to such coverage 
for a plan that has enhanced alternative coverage, or the Medicare 
Advantage monthly prescription drug premium for those enrolled in such 
a plan, or (2) the greater of the low-income benchmark premium amount 
for a PDP region or the lowest premium for a prescription drug plan 
(PDP) that offers basic prescription drug coverage in the PDP region. 
The benchmark premium for each region is based on a weighted average of 
the premiums for basic prescription drug coverage charged by the Part D 
plans available in the region. 

[15] The premium subsidy for these LIS recipients is 100 percent of the 
premium subsidy amount if a beneficiary's income is at or below 135 
percent of the applicable FPL, 75 percent if it is greater than 135 
percent but less than or equal to 140 percent of the FPL, 50 percent if 
it is greater than 140 percent but less than or equal to 145 percent of 
the FPL, and 25 percent if it is greater than 145 percent and less than 
150 percent of the FPL. 

[16] CMS facilitates or auto-enrolls most LIS recipients into a 
Medicare Part D prescription drug plan. 

[17] The MMA permits beneficiaries to apply to their state Medicaid 
programs for the LIS, but few do so. See GAO-07-555 and GAO-08-812T. 

[18] The SSA application form is reproduced in appendix I. 

[19] SSA officials considered using income rather than assets in the 
initial screening question. However, they chose assets as a screener 
because it is more straightforward--there are only two variants of the 
assets limits (individuals or couples). 

[20] Section 116 of the Medicare Improvements for Patients and 
Providers Act of 2008, Pub. L. No. 110-275, provides an exemption from 
income of in-kind support and maintenance, and an exemption from 
resources of the value of any life insurance policy for purposes of the 
LIS determination. These provisions are applicable, however, only to 
applications filed on or after January 1, 2010. 

[21] CMS originally required a state program to offer wrap-around 
benefits to Part D-eligible beneficiaries, regardless of which Part D 
plan the beneficiary enrolled in. In 2008, these requirements were 
revised, permitting SPAPs to enroll their beneficiaries into plans 
meeting state-specific coordination criteria, such as offering similar 
formularies or expanding pharmacy networks. SPAPs are required to 
submit information about their program and coordination criteria to CMS 
before the start of the benefit year, and CMS reviews these criteria to 
ensure that they do not restrict enrollment to a small number of plans. 
See 42 C.F.R. § 423.464 for an explanation of other requirements to be 
a qualified SPAP. 

[22] Two states operate SPAPs that are not open to Medicare 
beneficiaries. 

[23] The three remaining SPAPs provide assistance to individuals in 
high-risk pools. Such individuals have been rejected by insurance 
carriers or have substantially reduced coverage due to preexisting 
medical conditions or other restrictions. 

[24] For 2008, the threshold for the asset test in North Carolina's 
SPAP was higher than that for the LIS--$22,381 versus $11,990 for 
individuals and $34,322 versus $23,970 for couples. 

[25] Some SPAPs, including New York's Elderly Pharmaceutical Insurance 
Coverage program, pay Part D enrollees' coinsurance after the 
catastrophic coverage threshold. 

[26] Enrollees may be required to meet an income threshold or enroll in 
designated prescription drug programs. 

[27] Medicare Part D requires every plan to provide coverage of broad 
classes of drugs in its formulary; however, the plan is not required to 
include every brand in the class in its formulary. For example, every 
plan must pay for statins, which are widely used to lower cholesterol, 
but a plan may choose to pay for Zocor but not Lipitor. 

[28] According to The Partnership for Prescription Assistance, a 
collaboration among pharmaceutical companies, medical care providers, 
patient advocates, and other groups, there are more than 180 PAPs 
sponsored by manufacturers, some of which do not accept Medicare 
beneficiaries. 

[29] According to RxAssist, a pharmaceutical access information center 
operated by Volunteers in Health Care (based in the Brown University 
Center for Primary Care and Prevention), 35 PAPs do not accept Part D 
enrollees, and another 22 do not accept any Medicare beneficiaries. 

[30] In many cases, PAPs require applicants to submit supporting 
documentation, such as income tax returns, W-2 forms, bank statements, 
Social Security benefit statements, or unemployment benefit statements. 
Some PAPs also require applicants to provide information about their 
assets or require that their out-of-pocket spending exceed a percentage 
of their income. 

[31] The Department of Health and Human Service's (HHS) Office of 
Inspector General (OIG) issued an advisory opinion in April 2006 
stating that as long as a PAP operates entirely outside of the Part D 
benefit, the program can provide free and discounted drugs to Medicare 
beneficiaries (HHS, OIG, OIG Advisory Opinion No. 06-03, Apr. 18, 
2006). 

[End of section] 

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