When Americans become eligible for Medicare at 65, they're frequently unprepared for one big surprise: Their out-of-pocket health costs can be enormous.
In 2023, the annual Part B premium and deductible (for doctor’s visits and home health care) totals $2,205, and the Part D prescription drug premium can run up to $505. Then there are co-insurance costs and medication co-pays before Medicare’s catastrophic coverage kicks in. A hospital stay has a $1,600 deductible. And this year’s out-of-pocket maximum for private insurers’ Medicare Advantage plans can hit $8,300 to see in-network doctors.
Seniors are feeling the strain of these costs: A recent eHealth poll found that 75% of people with Medicare Advantage, Medigap, or Medicare Part D plans said they were worried about being able to afford their out-of-pocket costs.
Medicare Savings Programs and Extra Help
What many Medicare beneficiaries don’t know, however, is that there are five government programs that can sharply reduce Medicare out-of-pocket costs for low- and middle-income people.
These are joint programs from Medicare and Medicaid for people who are generally at, or slightly above, the poverty line. The programs help pay Medicare Part A, B, and D premiums and deductibles, co-insurance, and co-payments.
Four of the initiatives are called Medicare Savings Programs (MSPs), also known as Medicare Buy-In programs or Medicare Premium Payment Programs. They offer substantial savings on Medicare Parts A and B. AARP estimates at least 1.47 million Americans could save about $2,000 or more each year through MSPs.
Medicare Savings Programs “can be a lifesaver,” says Ann Kayrish, senior program manager for Medicare at the National Council on Aging. “[F]or someone making $14,000 to $15,000 a year, $164 a month [the Medicare Part B premium] is a lot of money. It could be the difference of whether you could eat or not eat.”
The fifth Medicare subsidy program, for saving on Part D prescription drugs, is known as Extra Help. You automatically qualify for it if you’re approved for one of the three main Medicare Savings Programs. The Social Security Administration estimates Extra Health is worth up to $5,000 a year.
Why so few eligible people sign up
Only about half of people who qualify for Medicare Savings Programs use them, however.
A February 2023 AARP report noted that historically MSP enrollment has been low despite efforts to increase participation. In North Dakota, just 7% of Medicare beneficiaries are enrolled in the programs.
“Low enrollment in the MSPs has been an ongoing concern for policymakers,” a 2020 report from the Medicaid and CHIP Payment and Access Commission (MACPAC) noted.
“There’s research that proves people don’t know about these programs,” says Kayrish. “Some don’t want to apply because they think other people need the programs more than they do. Some don’t trust the government. And some don’t understand the programs.”
Complicated rules and applications
The Medicare Savings Program rules are complicated. The Centers for Medicare and Medicaid Services site has a ghastly instructional diagram called Navigating the Medicare Savings Program (MSP) Eligibility Experience that goes on for six pages.
Part of the problem is that each state has its own eligibility requirements and applications.
In recent years, a few states such as Connecticut, Indiana, Maine, Massachusetts, and New York have increased the eligibility limits or simplified the application process in hopes of reaching more people in need.
New York is helping more people qualify
New York, for example, recently expanded MSP eligibility to allow as many as 300,000 more residents to enroll. The state raised the income limits and no longer restricts the assets that beneficiaries can have. The New York application is just one page.
“We’re really on a campaign to get folks into the programs,” says Heather Leddick, coordinator of New York’s Health Insurance Information, Counseling and Assistance Program. It’s one of the nation’s State Health Insurance Assistance Programs (known as SHIPs), which offers free, unbiased advice about Medicare Savings Programs and Medicare in general.
Leddick says New York’s Medicare Savings Program can save residents up to $7,000 annually.
Other states, however, have laborious processes to apply for their Medicare Savings Programs. Some require filling out dozens of pages of forms and providing detailed documentation of their income, assets, and even their life insurance policies.
But Medicare beneficiaries who do qualify for Medicare Savings Programs can apply anytime. “That’s big,” says Kayrish. “It means you’re not waiting around for the next Medicare Open Enrollment period.”
To continue receiving the MSP or Extra Help benefits, however, you must reapply each year.
A guide to the 5 Medicare Savings Programs
Here’s a guide to each of the programs, with the caveat that some states have their own limits on income and what Medicare calls “resources.” Resources include money in checking, savings, or retirement accounts, as well as stocks and bonds. It doesn’t include your home, one car, furniture, or other household items.
Qualified Medicare Beneficiary Program (QMB): The most popular and biggest of the Medicare savings programs, it helps pay for Part A and B premiums, deductibles, coinsurance, and copayments.
To be eligible, your monthly income can’t exceed $1,235 or $1,663 for a married couple ($14,820 or $19,956 annually), and your resources generally must be below $9,090 ($13,630 for married couples).
If you qualify for the QMP program, you automatically qualify for the Extra Help program for prescription drugs, and you won’t owe more than $4.30 for each drug covered by your Medicare drug plan.
Specified Low-Income Medicare Beneficiary Program (SLMB): It helps pay for Part B premiums. Your income can be slightly higher than with QMB: $1,478 a month or $1,992 for couples ($17,736 or $23,904 annually). Here, too, you qualify for the Extra Help program, but your maximum out-of-pocket prescription costs are $10.35 per covered drug.
Qualifying Individual Program (QI). Like SLMB, it helps pay for Part B premiums. Your income can be up to $1,600 a month or $2,239 for couples ($19,200 or $26,868 annually).
This program, however, is first come/first serve. Priority goes to people in the QI program the previous year. QI beneficiaries also get the Extra Help assistance. As with SLMB, your maximum out-of-pocket prescription costs are $10.35 per covered drug.
Qualified Disabled & Working Individual Program (QDWI). It only helps pay for Part A premiums (most people on Medicare don’t owe Part A premiums), and it’s the one MSP whose beneficiaries don’t qualify for Extra Help.
Unlike the other Medicare Savings Programs, to get into this one you must be under 65, working with a disability, and have limited income and assets.
The monthly income and resource limits are substantially higher than the other MSPs. Here, you can have a monthly income as high as $4,975 or $6,659 if you’re a married couple ($59,700 or $79,908). The resource limit is $4,000 for individuals and $6,000 for couples.
Extra Help: You must be enrolled in a Medicare Prescription Drug plan and Medicare Part A and/or Part B to qualify. Your combined savings, investments, and real estate excluding your home can’t be worth more than $16,660 ($33,240 if you are married).
To apply for Extra Help, submit an application through the Social Security site.
“People who are eligible for the Extra Help low-income subsidy program will really see their cost come down for prescription drugs, and they’re going to be able to afford those medications,” says Leddick.
The Biden administration has proposed regulations to make Medicare Savings Plans somewhat simpler in the future. States would then need to implement the rules, which means Medicare beneficiaries probably wouldn’t see them take effect until late 2024.
Where to get help
If you have questions about any of the Medicare Savings Programs or Extra Help, you can call your state SHIP office, Medicaid office, or Medicare’s toll-free number, 877-486-2048.
You can also visit Medicare’s site or the National Council on Aging’s benefit enrollment centers.
If you have a Medicare Advantage plan, you can phone its health insurer for assistance to see if you qualify for a Medicare Savings Program or Extra Help and how to apply.
