When you first sign up for Medicare, be prepared for some sticker shock. Because you’ve been paying Medicare taxes all through your working life, you may have assumed that once you retire, all your health care costs will be covered.
It can come as a rude awakening to learn that all those taxes you paid only cover one part of your Medicare costs — Medicare Part A, or hospital insurance. You must continue to pay premiums for Medicare Part B (medical insurance) and Part D (prescription drug coverage), as well as other expenses like deductibles, copayments, and coinsurance.
All these expenses can add up to quite a sizable sum. According to a 2020 AARP analysis, people using traditional Medicare spent an average of $5,801 on health care costs in 2017. For about 1 in 10 people, total costs extended to five figures. (This analysis didn’t include people on Medicare Advantage plans, since AARP didn’t have any reliable data about their expenses.)
For many senior citizens, especially those on fixed incomes, this amount of money is a serious financial burden. According to AARP, half of all people on traditional Medicare in 2017 spent at least 16% of their income on health care. For 1 in 10 beneficiaries, health care costs ate up more than half their income.
Fortunately, there are several federal and state programs to help Medicare recipients with these unmanageable costs. If you’ve crunched the numbers and found that the total out-of-pocket cost for Medicare looks like more than you can afford, it’s worth looking into whether one of these programs can help you.
The Medicaid program primarily exists to provide health insurance for people with limited income and those with disabilities.
However, it also helps nearly 1 in 5 Medicare recipients pay for their premiums and other Medicare costs, according to the Kaiser Family Foundation (KFF). In particular, Medicaid helps seniors pay for long-term care Medicare doesn’t cover.
People who receive both Medicare and Medicaid are called “dual eligibles.” They can get their Medicare coverage through either Original Medicare — Parts A, B, and D — or through a Medicare Advantage plan.
If you have dual eligibility, Medicare is your primary insurer. It pays first for all the services that it covers. This includes prescription drugs covered by Medicare Part D. People who have dual eligibility automatically qualify for Extra Help (discussed below) to help them pay for a Medicare prescription drug plan.
If you have any expenses left on your medical bill that Medicare doesn’t pay, your Medicaid coverage kicks in to cover them. This includes any remaining prescription drug costs not covered by your Part D plan.
If you have both Medicare and full Medicaid coverage, the two plans together should cover most of your health care costs.
In some states, Medicare is working with health insurers to offer special plans for dual eligibles that make it easier to get all their costs covered, including prescription drug costs.
These plans, called Medicare-Medicaid Plans, are available only in certain areas. Consult the Medicare plan comparison site to see if these plans are available near you.
Qualifying for Medicaid
According to a 2017 issue brief from the KFF, Medicare beneficiaries can qualify for Medicaid in multiple ways:
- SSI Benefits. In general, anyone who receives Supplemental Security Income (SSI) also qualifies for Medicaid. SSI is a program run by the Social Security Administration (SSA) to provide benefits for low-income people who can’t work due to age or disability.
- Income. States may offer Medicaid benefits to seniors and people with disabilities who have incomes below the federal poverty level (FPL). For 2020, this level is $12,760 for a single person. However, in many states, the income limit for Medicaid is lower than this amount. According to the KFF, the median income limit in 2018 was 74% of the FPL for elderly people and people with disabilities.
- Medical Spending. If your income is over the state limit for Medicaid but you spend most of that income on medical expenses, you can qualify as “medically needy.” Under this process, you “spend down” your income by subtracting your medical expenses until you reach the level needed to qualify for Medicaid. However, this level can be lower than the amount you’d need to qualify based on income alone. According to the KFF, on average, states only grant Medicaid benefits based on medical need once you’ve spent down all but $500 per month of your income, putting you at 48% of the FPL.
- Long-Term Care. Finally, states can also provide Medicaid benefits to people making more than the FPL if they require long-term care. The law allows states to offer Medicaid to people in need of long-term care who make up to 219% of the FPL, or three times the income limit for SSI.
In addition to looking at your income, state Medicaid programs usually require you to meet an asset test. That means you can’t have total assets above a specific limit set by the state. In most cases, this limit is $2,000.
To learn more about Medicaid eligibility in each state and how to apply, consult this state-by-state guide from Policy Genius.
Medicare Savings Programs
Some states have Medicare Savings Programs (MSPs) to help low-income people pay for the costs of Part A and Part B premiums. In some cases, MSPs can also help with other out-of-pocket costs.
There are four types of MSPs, each with its own set of income and asset limits. The income limits shown below are for the Lower 48 states; limits are slightly higher for people in Alaska and Hawaii.
To learn more about requirements in these states, contact their State Health Insurance Programs (SHIPs).
Qualified Medicare Beneficiary (QMB) Program
This program helps cover premiums for Medicare Parts A and B. It can also help pay for cost-sharing expenses, such as deductibles, coinsurance, and copays.
If you’re enrolled in a QMB program, Medicare providers aren’t allowed to bill you for any service provided under Part A or Part B. They can charge you for prescription drugs covered under Medicare Part D, but only up to a limited amount. For 2020, the limit is $3.90 per prescription.
In general, QMB programs are open to people earning no more than $1,084 per month in 2020. For couples, the income limit is $1,457.
There’s also an asset test for this program: $7,860 for an individual or $11,800 for a couple. This limit is based on “countable resources,” including money in a bank account and investments such as stocks and bonds.
It doesn’t include the value of your home, car, furniture, other household items, a burial plot, and up to $1,500 set aside for funeral expenses.
Specified Low-Income Medicare Beneficiary (SLMB) Program
The SLMB program provides help with Medicare Part B premiums only. It’s open to people who are enrolled in Medicare Part A and have limited income and resources.
The asset limits for the SLMB program are the same as for the QMB program. However, the income limits are slightly higher. You can qualify if you earn no more than $1,296 per month ($1,744 for a married couple).
Qualifying Individual (QI) Program
Like the SLMB program, the QI program helps cover Part B premiums for people who also have Part A. However, there are a couple of differences between the two.
First of all, the QI program is not open to people who qualify for Medicaid. It also has higher income limits: $1,456 per month for an individual and $1,960 for a couple. Its asset limits are the same as for the QMB and SLMB programs.
The other main difference is that funding for the QI program is limited, so people must reapply for benefits each year. Benefits are granted on a first-come, first-served basis.
Qualified Disabled and Working Individuals (QDWI) Program
The final type of Medicare Savings program is the QDWI program, which helps working people with disabilities pay their Medicare Part A premiums.
One particular group it helps is those who no longer qualify for premium-free Part A because they’ve gone back to work. However, any working disabled person under age 65 can participate.
This program has the highest monthly income limits of the four: $4,339 for an individual and $5,833 for a couple. It also has the lowest asset limits: just $4,000 for an individual and $6,000 for a couple.
Applying for an MSP
You can receive help from an MSP if all three of the following apply to you:
- You have or are eligible for Medicare Part A
- Your income for the past year is at or below the income limits for the program
- Your assets, defined as countable resources, are below the asset limits set for the program
Income and resource limits for the program increase every year, so it’s worth applying even if your income or assets are above the limits listed here. To apply, contact either your state Medicaid program or your SHIP.
MSPs only help with costs for Medicare Part A, Part B, or both. They don’t provide any help with prescription drug costs.
However, there’s a separate assistance program, called Extra Help, that can lower Medicare Part D premiums and other drug-related expenses for low-income people.
Depending on your income, Extra Help may reduce or even eliminate your Part D premiums and deductibles. It also limits the amount you pay out of pocket for each prescription you fill.
For 2021, people using Extra Help pay no more than $3.70 out of pocket for each generic drug and $9.20 for each brand-name drug. All told, the SSA estimates the value of Extra Help benefits to be around $5,000 per year.
Who Qualifies for Extra Help
To qualify for Extra Help, you must meet limits for both yearly income and resources. For the year 2020, the limits were:
- Income: $19,140 for an individual or $25,860 for a married couple. This amount does not include certain types of cash payments, such as Earned Income Tax Credit (EITC) payments, SNAP (food stamps), housing aid, home energy assistance, disaster assistance, or college scholarships and grants.
- Assets: $14,610 for an individual or $29,160 for a couple. Assets that count toward this limit include bank account balances, stocks, and bonds. The value of your home, car, and other belongings doesn’t count.
Applying for Extra Help
Extra Help enrollment is simple. If you are enrolled in Medicare and also receive Medicaid, SSI, or help with Part B premiums from an MSP, you’ll automatically receive Extra Help benefits.
Otherwise, you can apply for Extra Help through the SSA. You can apply online, at your local Social Security office, or by calling Social Security at 1-800-772-1213 (1-800-325-0778 for TTY users).
After you apply, Social Security will review your application and send you a letter to let you know if you qualify. If you do, you can select a Medicare Part D plan or let the Centers for Medicare and Medicaid Services choose one for you.
The sooner you choose a plan, the sooner you can start receiving benefits.
If you don’t qualify for Extra Help, you can reapply to the program at any time if your income and resources change. In the meantime, you can look for other state programs that could help you with your Medicare prescription drug costs.
Contact your state Medicaid office or SHIP for information.
The Program of All-Inclusive Care for the Elderly, or PACE, is a joint program run by Medicare and Medicaid.
Its goal is to help people over 55 who need full-time care meet their needs in the community rather than going into a nursing home or other health care facility. Most PACE participants are dual eligibles.
How PACE Works
PACE assigns you to a team of health care professionals who work with you and your family to coordinate your care throughout the health system. Your team can include:
- A primary care physician
- A nurse
- A physical therapist
- An occupational therapist
- A dietician
- A recreational therapist or activity coordinator
- A social worker
- A home care liaison
- A driver
- Personal care attendants
- The PACE center supervisor
Members of this team meet on a regular basis — usually every day — to discuss your situation and make sure all your medical and social needs are being met.
Typically, these providers only work with a small number of patients, so they can really get to know you and your health care needs.
All these individuals work for a PACE organization — a nonprofit that provides PACE health care services. A PACE organization must have a defined service area and a physical site to provide adult day care services.
It must also meet strict requirements for governance, ethics, and financial soundness.
What PACE Covers
PACE takes the place of traditional Medicare (including Medicare Part D) or Medicare Advantage. It covers all services that would normally be covered by either Medicare or Medicaid, plus any other services your health care team thinks are medically necessary for you.
Services covered by PACE include:
- Doctor visits
- Hospital care
- In-home care
- Short-term nursing home stays
- Prescription drugs
- Physical or occupational therapy
- Adult day care, including doctor and recreational therapy nursing services
- Dental care
- Laboratory tests
- Nutritional counseling
- Social services, including caregiver training and support groups
- Transportation to and from the PACE center for medical appointments or activities
What PACE Costs
If you’re enrolled in PACE, you do not have to pay any deductible or copayment for any drug, service, or other care approved by your health care team.
If you qualify for both Medicare and Medicaid, you do not have to pay a premium for the program, either.
However, if you have Medicare but don’t qualify for Medicaid, you must pay a monthly premium to cover the program’s long-term care benefits and a separate premium for Medicare Part D drug coverage.
According to the American Council on Aging, these costs typically amount to between $4,000 and $5,000 per month. That’s a lot of money, but it’s less than the cost of full-time nursing home care.
According to the 2020 Cost of Care Survey by Genworth Financial, nursing home residents pay an average of $7,756 per month for a semi-private room or $8,821 per month for a private room.
Applying for PACE
You can qualify for PACE if:
- You receive Medicare, Medicaid, or both
- You are at least 55 years old
- You live within the service area of a PACE organization
- You need a nursing-home level of care, as certified by your state
- You can live safely within the community with the help PACE provides
PACE programs are only available in certain areas. To learn whether there’s one near you and see if you qualify, search Medicare.gov or call your Medicaid office.
The Medicare program is complicated. Just choosing and signing up for coverage is difficult, and trying to figure out whether you qualify for financial assistance adds an extra layer of complexity to the process.
If you find yourself feeling overwhelmed, get in touch with your SHIP. Counselors there understand the details of the Medicare program and can help you figure out what kind of aid you’re eligible for and how to sign up.
It’s worth noting that if you qualify for help with Medicare costs, there’s a good chance you’re eligible for other types of emergency financial assistance as well. Depending on your financial situation and where you live, you may be able to get help with housing costs, food, utilities, and other expenses.
To learn about other types of government benefits that might be available to you, visit Benefits.gov. By filling out a single questionnaire on the site, you can find out about a wide variety of government programs you’re eligible for and how to apply for them.
Other places to look for emergency assistance include the 2-1-1 program, which you can reach at 211.org or by dialing 2-1-1 on your phone, and local community action agencies you can find through Community Action Partnership.