Medicare Part D’s Low-Income Subsidy Program

A new report examining the first 5 years of the Medicare Part D Low-Income Subsidy (LIS) program found that since its inception, the program has helped connect low-income patients with affordable prescription drugs; however, the program’s application and renewal process as well as continually changing plan offerings have caused problems within the program. The report, released by the Henry J. Kaiser Family Foundation, assessed statistics from the first 5 years of the LIS program and identified possible strategies for improvement. During the study, the report’s authors found that there was a low take-up rate for LIS recipients. In 2009, only 40% of the 3.8 million people who need to apply for the benefit on their own received the subsidy and, according to the report, this low participation rate has remained about the same since the program’s start. After reviewing national survey data and information from Medicare beneficiary counselors, the authors reported that the low takeup rates could be attributed to a lack of awareness about the LIS benefits and confusion about the complex application process. The authors also examined how the design of the LIS program contributed to coverage and plan stability and found that the benchmark plan market has been volatile. Since 2006, there has been a 25% decrease in the number of benchmark plans—standalone prescription drug plans that are available for LIS beneficiaries with no premium cost—available to LIS beneficiaries. According to the report, at enrollment time for the 2010 plan year, almost 4 of every 10 LIS beneficiaries were enrolled in a plan in 2009 that no longer qualified as a benchmark plan. The volatility in available benchmark plans varies based on region. The disruption in coverage also varied by region, although nationally about 15% of LIS beneficiaries were reassigned to a new plan in 2010. Of those who were reassigned, most were reassigned to a plan operated by a different organization. Although beneficiaries are given the option of switching to another plan after reassignment, according to the report, most do not. In addition, the report found that there are a growing number of LIS beneficiaries who are not in basic benchmark plans. They reported that the number of LIS beneficiaries who are no longer in basic benchmark plans, and subsequently paying premiums for Part D coverage, has gone from 3% in 2006 to 15% in 2010. The number of choosers, or beneficiaries who switch plans at any point and are then no longer automatically enrolled in new plans, has also grown, from 700,000 in 2007 to 2.2 million in 2010. The authors noted that there are some LIS beneficiaries who are paying significant amounts for drug coverage. One third of LIS beneficiaries are paying ≥$10 in premiums each month, and the total number of LIS beneficiaries in prescription drug plans that pay premiums has increased from about 490,000 in 2006 to 1.7 million in 2010. Aside from assessing statistics from the past 5 years, the report also identified strategies that may help improve the effectiveness of the LIS program. According to the authors, sharing additional data and assisting beneficiaries with the enrollment process may help increase the program’s take-up rates. A default enrollment process using data from Social Security Administration (SSA) records, tax records, and enrollment records from other low-income programs could also help connect eligible recipients with the benefits. A recent change to the Medicare Savings Programs (MSP) resource limits for LIS beneficiaries, as well as a new SSA policy that would send data from LIS applications to states to begin an MSP application on the beneficiary’s behalf if permission had been granted, may also increase use of the LIS program. The authors also suggested promoting stability among benchmark plans and minimizing coverage disruption. One way disruption could be minimized is by assigning beneficiaries to new benchmark plans that match their current prescription drug regimens instead of randomly selecting the new plans. They could also consider making assignments based on performance or quality ratings, or begin assigning some beneficiaries to enhanced plans. The Centers for Medicare & Medicaid Services has also considered reassigning those beneficiaries who are deemed choosers to new plans if their premiums would be higher in the next year.