No: 108-13R
Date: December 2, 2003

Congress Completes Action on H.R. 1,
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 

On November 25, 2003 by a vote of 54-44, the Senate approved the conference report on H. R. 1, the "Medicare Prescription Drug, Improvement, and Modernization Act of 2003."  The House approved the conference report by a vote of 220-215 on November 22, 2003.  H.R. 1 now goes to the President, who has indicated that he will sign the bill.


H.R. 1 creates a voluntary prescription drug benefit program (Part D) for all individuals eligible for Medicare under which they would pay a monthly premium for coverage in helping them purchase prescription drugs.  The bill establishes a transitional drug discount card, includes provisions for combating fraud, waste, and abuse in the Medicare program, and makes revisions in existing Parts A and B of Medicare including provisions relating to rural health care, inpatient hospital services, skilled nursing facility services and home health care.  The bill also reduces the Medicare Part B premium subsidies for certain individuals and establishes tax-free Medical Savings Accounts.

Following are descriptions of provisions in the bill that would directly affect the Social Security Administration (SSA).

Premium and Cost-Sharing Subsidies for Low-Income Individuals Under Part D

  • Would provide Part D prescription drug premium and co-payment subsidies for low-income individuals.  Individuals with incomes of less than 135% of the Federal poverty guidelines for a family of the applicable size, and resources of less than three times the SSI resource limits ($6,000 individual/$9,000 couple, indexed for inflation) would be eligible for a 100% premium subsidy.


  • Would automatically treat as subsidy eligible individuals those individuals who are eligible for SSI; individuals not eligible for SSI but who are eligible for full Medicaid coverage along with Part D coverage; certain Qualified Medicare Beneficiaries (QMB); and certain Specified Low-Income Medicare Beneficiaries.
  • Would provide premium subsidy assistance for individuals with incomes between 135% and 150 percent of the Federal poverty guidelines for a family of the applicable size.  In order to qualify, the resources of an individual could not exceed $10,000, while resources for a couple could not exceed $20,000. These resource limits would be indexed in the future for inflation.  The amount of the subsidy would equal 100% of the monthly premium for individuals at 135% of poverty and would gradually decline until it would be completely phased out for those at 150% of poverty.


  • Would provide that individuals eligible for premium subsidies will also qualify for lower co-payments when purchasing drugs.
  • Would require SSA and the States to accept and adjudicate applications for Part D subsidy assistance.  In making determinations, both SSA and the States will employ the SSI definition of income and resources.  The bill is silent concerning methods of verifying income and resources except under the simplified application process described below.  The bill appropriates $500 million for SSA's use in administering these subsides for fiscal years 2004 and 2005.


  • The Secretary of Health and Human Services (HHS), in consultation with the Commissioner, would be required to develop a modified, simplified application form for determination and verification of such individuals' income and resources.  The application would be required to include the individual's attestation under penalty of perjury regarding the value of his or her resources.  Recent statements (if any) from financial institutions would be required to accompany the application, and appropriate methods of verification would be required for all matters attested to in the application.
  • Would require that whichever entity--SSA or the State--made the initial determination of eligibility for a subsidy would conduct any appeal and redetermination of the case.  The Commissioner would be required to establish procedures for appeals of SSA determinations similar to the current hearing procedures in the SSI program.  SSA redeterminations of eligibility would be made at such time or times as provided by the Commissioner.


  • Would provide the Commissioner with access to tax information to carry out low-income determinations under Part D as is currently available under the SSI program.
  • Would be effective January 1, 2006, with an initial 6-month open season for Part D enrollment between November 15, 2005 and May 15, 2006.

Medicare Prescription Drug Discount Card and Transitional Assistance Program

  • The Secretary of HHS would administer the drug discount card transitional assistance program using information from other agencies for verifying an individual's self-certification relating to such matters as income and family size in connection with his or her application such assistance.  SSA would be required to provide financial information from its records for this purpose.  States would provide the Secretary with Medicaid information, and the Secretary of the Treasury would provide HHS with tax information.


  • Would be effective no later than 6 months after the date of enactment and remain in effect until Part D is implemented in January 2006.

Outreach by the Commissioner

  • Would require the Commissioner to identify and notify individuals eligible for

Part D subsidies and the transitional drug assistance similar to the current-law requirement in section 1144 concerning identification and notification of individuals potentially eligible for Medicare cost sharing programs (e.g. QMB and SLMB.)

  • Would require the Commissioner to furnish appropriate State agencies with the name and address of individuals residing in the State who may be eligible for Part D subsidies or transitional drug assistance based on benefit information in SSA's records. 

Income-Related Reduction in Part B Premium Subsidy

  • Would require, beginning in 2007, that Part B Medicare beneficiaries with modified adjusted gross incomes over $80,000 for an individual and $160,000 for a married couple pay a higher Part B premium than individuals with lesser incomes.  The amount of the increased premium premiums would be based on ranges of income specified in the bill.  For example, an individual with modified adjusted gross income between $100,000 and $150,000 would pay a higher Part B premium than an individual with income between $80,000 and $100,000.


  • Would require SSA to make the determinations as to the amount of an individual's Part B premium if above the applicable threshold. 
  • Would authorize the Secretary of the Treasury to give SSA information concerning an individual who may be subject to the increased premium.  Such information would include an individual's modified adjusted gross income, filing status, and amounts of tax-exempt interest.  Generally, tax information used for the determinations would be for the taxable year beginning in the second calendar year preceding the year involved.


  • Would provide that tax information from an earlier year would be used on a temporary basis if an individual's tax information for the applicable year were not yet available.  When tax information from the applicable year were available, such information would be used and adjustments in the premiums would be made. 
  • Would require the Commissioner and the Secretary of the Treasury to develop regulations to provide for an increased premium if an individual does not file a tax return and there is information that the individual's modified adjusted gross income exceeds the thresholds.  Generally, this would apply in situations in which individuals pay their taxes in full on a quarterly basis over the tax year.


  • Would require the Commissioner, in consultation with the Secretary of the Treasury, to develop procedures to use more recent year's tax information at the request of the individual and an appropriate method for aggregating or disaggregating information from tax returns in the case of marriage or divorce.  Also would require the Commissioner, in consultation with the Secretary, to promulgate regulations about using more recent information in the event of an individual's life changing circumstances and what constitutes such circumstances.

Collection of Premiums Under Medicare Advantage Program

  • Would provide individuals who are enrolled in Medicare Advantage programs the option of having their Medicare premiums deducted from their Social Security benefits or by an electronic funds transfer such as an automatic withdrawal from a bank account or by debit or credit card.  (Medicare Advantage replaces existing Medicare + Choice plans and enables individuals to enroll in designated private plans, which may be local Health Maintenance Organizations or regional Preferred Provider Organizations.  Medicare Advantage plans will offer drug coverage in addition to other medial benefits.


Beneficiary Outreach Demonstration Program

  • Would require Secretary of HHS to establish a 3-year demonstration project under which Medicare specialists employed by HHS would be stationed in at least 6 SSA field offices to assist Medicare beneficiaries.  At least 2 of the demonstration sites would be in rural areas.


  • Would require an evaluation by the Secretary about the utilization and satisfaction of the individuals served by the Medicare specialists and the cost-effectiveness of providing such assistance in SSA field offices.


  • Would require a report to Congress on the evaluation of the project and recommendation regarding permanently out-stationing Medicare specialists at SSA offices.

ALJ Medicare Hearing Transfer

  • Would require SSA and HHS to provide a plan to Congress and the General Accounting Office (GAO) for transferring administrative law judge (ALJ) Medicare hearing function from SSA to HHS no later than April 1, 2004. Would require the plan to include information on the following:

--anticipated workload and staffing requirements;
--funding requirements;
--transition timetable;
--case tracking system;
--feasibility of developing a process to give Department Appeals Board decisions   binding precedential authority;
--feasibility of filing appeals with ALJs electronically and conducing hearings       using teleconferencing or video-conferencing technologies;
--steps that should be taken to ensure the independence of ALJs;
--steps that should be taken to provide for an appropriate geographic distribution   of ALJs throughout the United States;
--steps that should be taken to hire ALJs and support staff;
--appropriateness of establishing performance standards;
--steps that should be taken to carry out any needed shared resources with SSA;
--needed training; and,
--any additional recommendations for further congressional action.

  • Would require GAO to evaluate the plan and submit a report to Congress on its evaluation no later than 6 months after the date on which it receives the plan.


  • Would require the Commissioner and Secretary to implement the plan no earlier than July 1, 2005, and no later than October 1, 2005.
  • Would require the Secretary to provide for appropriate geographic distribution of ALJs, would have the authority to hire ALJs and support staff, and enter into arrangements with the Commissioner, as appropriate, to share office space, support staff and other resources with appropriate reimbursement.


Funding Start-Up Administrative Costs for Medicare Reform

As mentioned earlier, would appropriate through September 30, 2005, $500 million to SSA and $1 billion to the Centers for Medicare and Medicaid Services to carry tout the provisions of this bill.