The Part D Medicare drug program rejected over half of the seniors who
applied for payment assistance based on either their income or the amount of
assets they reported, according to a new federal agency report.
The report by the Government Accountability Office (GAO), released in
September, examined the Low-Income Subsidy (LIS) or Extra Help program
included in Part D when Congress approved the Medicare prescription-assistance
plan in 2003. The LIS program was designed to help defray the cost of
prescription drugs for beneficiaries with "limited means" and
restricted the assistance program to beneficiaries whose assets and income
were less than the thresholds established by the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003. The Social Security Administration
is responsible for determining eligibility for the LIS.
In a report mandated by the 2003 Medicare Part D law, the GAO found that
more than half of the 4.5 million beneficiaries who applied for LIS assistance
in Fiscal 2006 were denied the subsidy. The report also found that about 56
percent, or 336,183 applicants, were denied the extra help in Fiscal 2007. The
continued high rejection rate and other LIS findings indicate that many more
seniors need help than are qualifying for assistance based on federal
standards, according to critics of those standards.
"This GAO report shows that there continues to be problems with
low-income beneficiaries getting the help they need with high drug
costs," said Rep. Henry Waxman (D-Calif.), chair of the House Oversight
and Government Reform Committee, in a written statement following release of
the report. "We need to take a hard look at the Part D asset test and
make the necessary reforms so that the Medicare program is working effectively
for our nation's seniors and ensuring they get the assistance they
There were no reported findings that the LIS rejections were erroneous or
that administrators did not follow the federal eligibility guidelines in
To qualify for the LIS, applicants must be below the Part D income and
asset thresholds, which for 2008 are $15,600 in income for individuals and
$21,000 for couples, and assets of $11,990 for individuals and $23,970 for
The LIS help can amount to substantial financial assistance. Generally,
Part D beneficiaries are responsible for paying monthly premiums, an annual
deductible, and copayments. Those who qualify for full LIS assistance pay no
deductible or monthly premiums, and they are not subject to Part D's"
donut hole" or coverage gap in prescription-drug costs between
$2,510 and $5,726.
The high rejection rate in the LIS program has helped limit the growth of
The Centers for Medicare and Medicaid Services (CMS) reported that 9.38
million beneficiaries were receiving the LIS as of January, but most qualified
automatically because they are recipients of Medicaid or Supplemental Security
Income or because they are enrolled in a Medicare Savings Program. Only 1.53
million of the LIS recipients (about 16 percent) had applied for the subsidy
and cleared its income and asset limits. CMS estimated that there were 2.6
million additional beneficiaries who were eligible for the LIS as of January
but were not receiving it because they had failed to apply.
The report noted that although the rate of LIS rejection remained at over
50 percent in Fiscal 2006 and Fiscal 2007, the percentage of beneficiaries
rejected because of income alone rose from 50 percent to 70 percent over those
"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," according to the
Among those who were denied based on their assets, many exceeded the asset
threshold by a relatively small amount. In both Fiscal 2006 and Fiscal 2007,
more than a quarter of assistance applicants exceeded the asset threshold by
less than $5,000.
Laura Summer, a senior research scholar at Georgetown University's
Health Policy Institute, testified before a congressional committee in May
that the LIS offers great potential for low-income beneficiaries to receive
substantial help with Part D premiums and cost sharing.
"Although they are entitled to this financial assistance, however,
millions of beneficiaries do not receive it," she said.
Summer called for the elimination of the asset test in determining LIS
eligibility. This would make the application process simpler and less time
consuming for beneficiaries, as well as for those who assist them and those
who process applications.
People who are rejected for LIS assistance also may seek help from some
state and drug-manufacturer programs created to help low-income Medicare
beneficiaries obtain prescription drugs. However, the report found that the
availability of these programs and the assistance they offer are"
Twenty-three states offer state pharmaceutical assistance programs, which
can supplement Part D benefits. Patient assistance programs offered by drug
manufacturers also assist low-income individuals in obtaining prescription
drugs, but the drugs are limited to those produced by the sponsoring