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Asset Test Disqualifies Many Widows of Modest Means from Low-Income Medicare Drug Benefit, Study Says

APRIL 14, 2005 — Widows make up almost half of the 2.4 million Medicare beneficiaries whose income qualifies them for the program's comprehensive drug benefit for low-income Americans but who are ineligible because of other financial assets, says a study sponsored by the Kaiser Family Foundation.

Based on income alone, about 15 million people qualify for the low-income benefit, about one million of whom live in nursing homes. Widows and widowers make up 43 percent of those who otherwise would qualify for the benefit but who are ineligible because of non-income assets. Widows make up 93 percent of this "widow and widower" population.

"The most likely scenario is that when a husband dies, income plummets, making the widow potentially eligible for low-income prescription drug subsidies," said the study. "However, her accumulated assets exceed those allowed under the legislation. Aggravating the situation is that asset thresholds are lower for individuals than for couples."

Drug coverage that starts in 2006 under the Medicare overhaul law (PL 108-173) provides much more comprehensive benefits to beneficiaries with incomes below 150 percent of the federal poverty line ($14,355 for an individual in 2005). But if an individual has more than $10,000 in assets or a married couple more than $20,000 they do not qualify even if they are eligible based on income. The one exception is if the beneficiary qualifies for both Medicare and Medicaid, in which case no asset test is applied.

Medicare does not count the value of a home, automobiles, and household furnishings and possessions when adding up assets. But the study said the findings nevertheless raise "serious questions about the equity of the asset test."

People with lower incomes, "by accumulating modest amounts of assets, either through bank accounts or retirement-savings vehicles ... have guaranteed that they will not qualify for the low-income Medicare drug subsidies — but a large majority use prescription drugs every day," the study said.

Asset tests "are generally intended to focus benefits on those with low incomes and exclude those with substantial assets," the study noted. But "a large proportion of the 2.37 million low-income beneficiaries who would not quality for the additional subsidies had relatively modest assets. Half of those with incomes exceeding the asset test have excess assets of $35,000 or less, and 42 percent exceed the limit by $25,000 or less."

The study's estimate of the number of people excluded by the asset test is higher than the 1.8 million announced by the Congressional Budget Office (CBO) in July 2004. Much of the difference stems from differences in methods of calculating income, the Kaiser study said. CBO's estimate, unlike Kaiser's, did not rely on the method specified in regulations implementing the Medicare law, according to the Kaiser researchers.

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