While Original Medicare will help cover hospital and medical costs, it does not cover your prescription drugs. To obtain drug coverage, you’ll need to purchase a Medicare Part D prescription drug plan or enroll in a Medicare Advantage (also known as Part C plan) that includes Part D drug coverage.
However, even with a Medicare Part D plan, you’ll be responsible for costs including monthly premiums and/or out-of-pocket expenses (such as annual deductible, copayments, and coinsurance). On average, the Part D basic premium is $30.50 in 2021 (previously $30.00 in 2020).
For those who cannot afford a Medicare Part D plan, you should consider applying for ‘Extra Help’ to help pay for your drug costs. The Social Security Administration notes that Extra Help is estimated to be worth about $5,000 per year. But precisely what is Medicare Extra Help?
What is Medicare Extra Help?
Medicare Extra Help, also known as Part D Low Income Subsidy (LIS), assists Medicare beneficiaries in paying for their prescription drugs, particularly if they have low income and resources.
This federal program, run by the Social Security Administration (SSA), pays for a Medicare beneficiary’s Part D expenses (premiums, deductibles, copayments, and coinsurance) by giving out full and partial subsidies. That means that if you have a full subsidy, you have free prescription drug coverage.
Who qualifies for Extra Help?
You automatically qualify for Extra Help if you meet one of these three (3) criteria:
- You are eligible for both Medicare and Medicaid benefits (also known as ‘dual-eligible’)
- You receive assistance from Medicaid in paying your Medicare Part B premiums and/or are enrolled in a Medicare Savings Program (MSP)
- You have both Medicare and Supplemental Security Income (SSI)
Fortunately, if you are not automatically qualify based on one of the criteria above, you may still get Medicare Extra Help if:
- You have Original Medicare (both Medicare Part A and Medicare Part B)
- You currently reside in the United States
- Your income, including the salary of a living-in spouse, is less than 150% of the Federal Poverty Level (FPL)
- Your resources (or savings/assets), including those of a living-in spouse, are within certain eligibility limits
- You are not incarcerated
The Department of Health and Human Services (HHS) decides on the FPL amount yearly. Therefore, your eligibility depends on your income and resource levels, plus the FPL announced for the year.
What are the Medicare Extra Help income limits?
In 2021, you may qualify for Extra Help if your income falls below 150% of the FPL, which are:
- For singles, an annual income of $19,320 (in 2021)
- For married couples living together, a yearly income of $26,130 (in 2021)
If your income level is above the threshold, you may still be eligible for Extra Help if you or your spouse:
- Support other family members living with you
- Have earnings from work
- Live in Alaska or Hawaii, which have slightly higher FPLs
What are Medicare Extra Help Resource Limits?
Aside from your income, SSA will consider your ‘resources’ when determining your eligibility:
- For singles, the resource limit is $14,790 (in 2021)
- For married couples living together, the resource limit is $29,520 (in 2021)
The ‘resources’ (or savings/assets) that contribute to your eligibility include:
- Bank accounts (savings, checking, and investments)
- Retirement accounts (IRA, 401K)
- Certificate of deposits (CD), mutual funds, and other similar investments made through financial institutions
- Stocks and bonds (including U.S. savings bonds)
- Real estate that is not your primary residence
On the other hand, the following are not counted as resources when SSA assesses your eligibility for Extra Help:
- Your home or primary residence
- One vehicle – car, motor home, or motorcycle
- Life insurance with a cash value less than $1,500
- Burial plot
- Burial funds up to $1,500 per person
- Household and personal items
- Others – check this list.
The income and resource limits are determined based on the annual FPL. Your civil status is as of the last day of the tax year.
How Much Can Extra Help Save You?
According to the SSA, Medicare Extra Help’s beneficiaries receive an estimated annual savings of $5,000. Your savings will differ depending on your situation and whether you are receiving a ‘full’ or ‘partial’ subsidy.
Your income, resources, marital status, and other factors will determine whether you get a full or partial subsidy. The basis of subsidy percentages depends on where you stand against the FPL.
The reductions to an eligible individual’s costs under a Part D plan include:
- Full Subsidy
- 100% subsidy for the monthly premium for basic prescription drug coverage
- Elimination of the annual deductibles
- Reduced cost-sharing for prescription drugs (up to $3.70 for generics and $9.20 branded drugs)
- Elimination of any cost-sharing above if your drug costs go above the annual Medicare out-of-pocket threshold ($6,550 in 2021)
- Partial Subsidy
- 25% to 100% subsidy of the monthly premium for basic prescription drug
- $92 annual deductible limit (vs. $445 maximum allowable by Part D plans for those not on Extra Help)
- 15% coinsurance for both generic and branded drugs (or you pay the plan’s copay, whichever is less)
- Capped cost-sharing of $3.70 for generic and $9.20 brand drug if your drug costs go above the annual Medicare out-of-pocket threshold ($6,550 in 2021)
Will Extra Help Reduce Medicare Part B Premiums?
No, Medicare Part B is for medical expenses, while the Extra Help program only lowers your Medicare Part D (prescription drug) costs.
However, if you are enrolled in a Medicare Savings Program (MSP), which will pay for your Part B premium, you are automatically eligible and enrolled in Extra Help. Therefore, you should always consider applying for an MSP if you think you qualify for Extra Help.
What is the Medicare Extra Help Application Process?
If you are automatically eligible for Extra Help through Medicaid or an MSP because you receive Supplement Security Income, there is no need to pro-actively apply for Extra Help.
For other cases, however, you need to request SSA to assess your case. There are many ways to apply for Extra Help:
- Apply online at ssa.gov/extrahelp.
- Visit in-person at any local Social Security office.
- Call SSA and apply via phone.
- Call SSA and request them to send an application form by post.
Once you have applied for Extra Help, the SSA will review your application and send you a letter saying whether you were approved.
What is the Medicare Extra Help Enrollment Period?
If the SSA accepts your Extra Help application, you can enroll in a Medicare Part D prescription drug plan (PDP) or Medicare Advantage Plan (MA-PD) immediately if you have not yet done so.
Moreover, if you are eligible for the Extra Help program, you are allowed to join or switch Part D plans once each quarter – this is also known as your quarterly Special Enrollment Period. Remember, you can only change once during each of these three periods:
- January to March
- April to June
- July to September
The changes will take effect on the first day of the following month.
You can also enroll or switch Part D plans during the Annual Enrollment Period (AEP), which falls from October 15 to December 7. The changes will take effect on January 1 of the following year.
Another plus – if you did not enroll under any Part D plan when you were first eligible (typically, during the Initial Enrollment Period), there will be no late enrollment penalty. This penalty fee is generally levied on late enrollees if you receive Part D coverage under Extra Help.
Does Extra Help Expire?
Your Medicare Extra Help benefit expires yearly on December 31, and you are required to be re-assessed for eligibility every year. One reason for losing your eligibility is if you no longer meet the FPL requirement for the year. Another reason is if you no longer qualify for Medicaid, SSI, or MSP.
The SSA will inform you by August or September if you lost your eligibility for Extra Help. You need to reapply within 30 days so that SSA can re-assess your case.
However, if you lose Extra Help, here are some ways to lower your prescription costs:
- Ask your doctor if you can switch to a generic drug or a cheaper brand-name drug.
- Purchase drugs from mail-order pharmacies
- Compare the cost of your prescription drugs across Medicare drug plans. Consider switching plans.
- Your state may have pharmaceutical assistance programs. Get more information from your Medicaid office or State Health Insurance Assistance (SHIP).
- Check out pharmaceutical companies with programs that pay for some prescriptions.
Extra Help can provide critical financial support for low-income earners. If you cannot afford a Part D plan but require prescription drug coverage, make sure to apply for Extra Help to see if you qualify for any subsidiaries.
Note that Extra Help’s annual income and resource requirement can change yearly, and you will be assessed for eligibility annually. If you no longer qualify for Extra Help, you need to start paying monthly premiums. Otherwise, you will lose prescription drug coverage.
Subsidy and copayment amounts may also change yearly depending on the Extra Help program adjustments.