Low-Income Subsidy — Medicare Extra Help Program

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Expert reviewed by: Ron Elledge, Medicare consultant
Published: 4/30/2021


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Ron Elledge
Medicare Consultant and Author
Ron Elledge
Medicare Consultant and Author

Ron Elledge is a seasoned Medicare consultant and author of “Medicare Made Easy.” As a Medicare expert, he regularly consults beneficiaries on Medicare rules, regulations, and strategies.

Everyone who qualifies for Medicare can choose to get Part D prescription drug coverage through either a stand-alone PDP Plan or Medicare Advantage Plan. These plans typically charge monthly premiums, deductibles and copayments, which vary by plan. If you have low income and financial resources, you may qualify for the Medicare Extra Help Program, which can help cover some of these costs.

What to Know About Medicare Extra Help:

  • The Medicare Extra Help Program, also called the Part D Low-Income Subsidy, helps Medicare beneficiaries with low income and resources pay for the cost of their prescription drugs and prescription drug coverage.
  • To qualify for Extra Help, you must be on Medicare and living in the U.S. with income and financial resources below a certain annual threshold.
  • Many people may qualify for Extra Help without realizing it.
  • You can apply for the Medicare Extra Help Program through the Social Security Administration online, over the phone or in-person, when restrictions allow.

The Medicare Extra Help Program, also called the Part D Low-Income Subsidy, helps Medicare beneficiaries with low income and resources pay for the cost of their prescription drugs and prescription drug coverage. This benefit is worth an estimated $5,000 per year, according to the Social Security Administration.

Many people may qualify for Extra Help without realizing it. To qualify for Extra Help, you must be on Medicare Part A and/or Part B and living in the U.S. with income and financial resources below a certain annual threshold. Here we explain what the Extra Help Program is, who qualifies and how to apply if you do.

What is the Medicare Extra Help Program?

“The Medicare Extra Help Program is a federal program that’s designed to help those who have limited income and resources pay for Medicare prescription drug program costs, such as premiums, deductibles and coinsurance payments,” says Robin Saks Frankel, Personal Finance Expert of Forbes Advisor. Under the Medicare Extra Help Program, you also won’t need to pay the Part D late enrollment penalty that is imposed for not enrolling in a prescription drug plan when you’re first eligible.

When you receive Extra Help, your drug plan ensures you never pay more than the Low Income Subsidy coverage cost limit. In 2021, this is no more than $3.70 for each generic or $9.20 for each brand-name covered drug, Saks says.

What are the Income Limits for Extra Help with Medicare?

To qualify for the Medicare Extra Help Program, your financial resources and income must be below certain thresholds. In 2021, the income limits for Extra Help with Medicare are:

  • $19,320 for individuals
  • $26,130 for married couples living together.

If your income is above these thresholds, you may still qualify for some extra help. For instance, if you or your spouse support other family members who live with you, you may qualify even with a higher annual income. Likewise, if you have earnings from work or live in Alaska or Hawaii, you might be able to receive help with income above the 2021 limits.

You should also note that not all cash payments count toward the annual income limit. The following payments do not count as income when determining the income limits for Extra Help:

  • Scholarships and education grants
  • Supplemental Nutrition Assistance Program benefits, also known as food stamps
  • Housing assistance
  • Earning income tax credit payments
  • Payments from others to help cover your household expenses
  • Home energy assistance
  • Disaster assistance
  • Medical treatment and drugs
  • Victim’s compensation payments

Contact the Social Security Administration to learn about other income exclusions.

To qualify for the Medicare Extra Help Program, you also need to have limited financial resources. Resources include the value of the things you own, such as real estate (excluding your primary residence), bank accounts, investments, Individual Retirement Accounts (IRAs) and cash.

Resources do not include your primary residence, your vehicles and items you couldn’t easily convert into cash, such as jewelry or furniture. Property needed to support yourself, such as rental property or land you farm, are also not considered resources. Nor are life insurance policies or burial expenses.

According to the latest guidance from the Social Security Administration, to qualify for Medicare’s Extra Help program in 2021 an individual’s resources – including bank accounts, stocks, and other resources that could be quickly converted to cash – must be limited to $14,790 and a couple living together can have no more than $29,520 in resources, Saks says.

How do you enroll in the Medicare Extra Help Program?

To apply for the Medicare Extra Help Program, you must complete Social Security’s Application for Extra Help with Medicare Prescription Drug Plan Costs (Form SSA-1020), Saks says. You can do this in one of the following ways:

  • Online at ssa.gov/extrahelp
  • Over the phone by calling the Social Security Administration at 1-800-772-1213
  • Through your local Social Security Office, when COVID restrictions allow.

Before starting the application, be sure to review your household income and identify the items you own which would be considered resources by the SSA, including items you own jointly with someone else. The application will ask about your income and resources as well as that of your spouse if you are cohabitating. For instance, you’ll need to provide the dollar value of all bank accounts and investments, as well as any cash you have at home and real estate that is not your primary residence.

You’ll also need to provide the monthly amount of income you receive from non-employment sources, such as Social Security, the Railroad Retirement Board or Veteran’s Administration. If you receive rental income, pensions, income from an annuity or alimony payments, these must be provided as well.

While the SSA doesn’t require you to give proof corroborating the information you provide on the application, it will compare your answers with data from other government agencies.

After the SSA reviews your application, you’ll receive a letter notifying you if you qualify for the Medicare Extra Help Program. Once you’ve qualified, you can choose a prescription drug plan on Medicare.gov and begin receiving benefits. If you don’t choose a plan for yourself, the Centers for Medicare & Medicaid Services will choose a plan for you.

You can learn more about the Medicare Extra Help Program and how to choose a prescription drug plan through the SSA’s “Understanding the Extra Help With Your Medicare Prescription Drug Plan” pamphlet.

Expert

This expert was consulted for insight into the Medicare Extra Help Program:

Robin Saks Frankel, Personal Finance Expert of Forbes Advisor

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