While Medicare can offer significant healthcare cost savings, it's essential to know how healthcare cost planning — and Medicare’s role — fits into your overall financial picture. This article provides a brief introduction into the following topics, including how to get help with Medicare bills.
In order to get a better understanding of maximizing your Medicare savings, first you must familiarize yourself with financial assistance programs available to you and how an Income-Related Medicare Adjustment Amount (IRMAA) can affect your unique situation.
Get Financial Help With Medicare
There are several financial assistance programs that are designed to help beneficiaries with Medicare premiums, copays, and out-of-pocket costs. This can include Medicare Part B payment assistance, in addition to helping to pay for Part D premiums. Programs available to help with these expenses include:
- Medicare Savings Programs (MSP)
- Extra Help
- State Pharmaceutical Assistance Programs (SPAP)
Each program has specific eligibility criteria and benefits.
To be eligible for Medicaid, individuals must meet certain criteria, including evidence of legally-established residence, household income, and family size. Medicaid provides health coverage to low-income families and individuals, including children, parents, pregnant women, seniors, and people with disabilities. Eligibility rules differ among states, but in general, individuals must be residents of the state in which they are receiving Medicaid and must be either citizens of the United States or certain qualified non-citizens, such as lawful permanent residents.
Eligibility guidelines are based on income and financial asset limitations. These guidelines reset annually and are usually available in January or February of each year. In terms of financial assets, all states disregard:
- The first $20 of monthly income
- Your primary house
- One car per household
- Household goods and wedding or engagement rings
- Burial spaces
- Bank account funds up to $1,500 per person
- Life insurance with a cash value of less than $1,500
Your Medicaid eligibility is subject to annual review; this process is called redetermination. Redetermination is conducted by your state’s Medicaid agency and the specific name of the agency will vary from state to state. In most cases, you’ll be assigned a caseworker who will collect your information and serve as a contact person during the redetermination process.
As a result of the COVID-19 pandemic, the Medicaid redetermination process was suspended. However, as of April 1, 2023, that process has re-started, and each state will have its own specific timeline.
If your eligibility changes, then that would be an event that would qualify you for a special enrollment period under Medicare and the Affordable Care Act (ACA) as well. You will have the ability to select a new health insurance plan outside the normal enrollment windows.
Medicare Savings Programs (MSP) Overview
Here is a list of the different levels of MSPs, and the accompanying income and asset limits established by the federal government. Your individual state can modify these criteria:
- Qualified Medicare Beneficiary (QMB): Individual monthly income limit of $1,235, and couple monthly income limit of $1,663. The asset limit is $9,090 for an individual and $13,630 for a couple.
- Specified Low-income Medicare Beneficiary (SLMB): Individual monthly income limit of $1,478, and couple monthly income limit of $1,992. The asset limit is $9,090 for an individual and $13,630 for a couple.
- Qualifying Individual (QI): Individual monthly income limit of $1,660, and couple monthly income limit of $2,239. The asset limit is $9,090 for an individual and $13,630 for a couple.
- Qualified Disabled and Working Individuals (QDWI): Individual monthly income limit of $4,379, and couple monthly income limit of $5,892.
If you’re looking for any help paying Medicare premiums: for QMB, SLMB, and QI recipients, Medicare Part B premiums are waived.
Applying for Medicare Savings Program Assistance
Apply through your state's Medicaid agency or Department of Health and Human Services. Be sure to collect financial information, such as wage and tax forms, in addition to current bank statements. This information will be collected and used to determine eligibility.
Extra Help (Low-Income Subsidy) Overview
Extra Help is a federal-administered assistance program and eligibility is determined by the Social Security Administration. This program provides financial support for various expenses associated with Medicare prescription drug plans — and prescription drug benefits within Medicare Advantage plans — such as premiums, deductibles, and copayments. By offering assistance with these costs, the program aims to ensure that those who need prescription medications can access and afford them, without being burdened by high out-of-pocket expenses.
To qualify for Extra Help, you must be enrolled in a Medicare Part D prescription drug plan or a Medicare Advantage Plan that includes prescription drug coverage. Additionally, your income and resources need to be below specific thresholds, which are subject to change each year.
In 2023, the income limit for Extra Help is $21,870 for an individual and $29,580 for a married couple living together. The resource limit is $16,660 for an individual and $33,240 for a married couple living together.
There are additional details involved. For example, it’s important to note that you may qualify for Extra Help even if your income or financial resources exceed the levels stated here. For example, if you are saving up to $1,500 for burial planning purposes, then the financial resource limits are higher. For Extra Help, you may still qualify for lower levels of financial assistance if your income exceeds the limits listed.
Applying for Extra Help can be done through the Social Security Administration (SSA) by submitting an application online, by phone, or in person at a local Social Security office. If you're eligible for Medicaid or receive Supplemental Security Income (SSI) benefits, you may automatically qualify for Extra Help and may not need to apply separately.
A frequently overlooked point is that while Medicaid eligibility will automatically qualify you for Extra Help — assuming that you are enrolled in Medicare — you may still qualify for Extra Help without qualifying for Medicaid. This means that you may qualify for Extra Help even if you do not qualify for an MSP in your state of residence.
The amount of assistance you receive from the Extra Help program depends on your income and resource levels. Some beneficiaries may have their entire premium covered, while others may only receive partial assistance. Regardless, the program can significantly reduce the financial burden of prescription drug costs for those who qualify.
State Pharmaceutical Assistance Programs (SPAP) Overview
State Pharmaceutical Assistance Programs (SPAP) are state-funded initiatives designed to help eligible residents with the costs of their prescription medications. These programs act as a supplement to Medicare, offering financial assistance to individuals who may struggle to afford their prescriptions even after enrolling in Medicare Part D or a Medicare Advantage Plan with prescription drug coverage.
Each state has its own SPAP, with varying eligibility criteria, benefits, and application processes. Some states may have more than one SPAP to cater to different needs, such as programs specifically for:
- Disabled individuals
- Those with certain medical conditions
Generally, eligibility for SPAPs depends on factors like age, residency, income, and resources. In some cases, the assistance provided by SPAPs can be coordinated with Medicare to further lower prescription drug costs.
The benefits offered by SPAPs may vary from state to state but typically include assistance with Medicare Part D premiums, deductibles, and copayments. Some programs may also offer coverage during the Medicare Part D coverage gap or "donut hole." It's essential to research your state's specific SPAP to understand the benefits and eligibility requirements.
To enroll in a SPAP, you'll need to apply directly through your state's program. You can typically find application forms and detailed information about the program on your state's official website or by contacting the state's health department. Keep in mind that you must also be enrolled in a Medicare Part D prescription drug plan or a Medicare Advantage Plan with prescription drug coverage to take advantage of the benefits provided by a SPAP.
Other Local Programs
In addition to state-administered Medicaid and the federally-administered Extra Help program, there may be additional, locally-based assistance programs that provide financial assistance, in addition to those listed in this article. You can check your county or city government in order to obtain further information.
In summary, Medicare beneficiaries have multiple options for financial assistance to help with their expenses.
Medicare IRMAA Overview
An Income-Related Medicare Adjustment Amount (IRMAA) is an additional amount that some individuals with higher incomes must pay on top of their regular Medicare Part B and Part D premiums.
The Social Security Administration (SSA) determines whether you'll be subject to IRMAA based on your modified adjusted gross income (MAGI) from your tax return two years prior.
For example, your 2021 tax return would be used to determine your 2023 IRMAA. The following income thresholds shown in the table below are used to determine whether you'll be subject to IRMAA.
Part B Premium
Part D Premium
$97,000 or less
$194,000 or less
$97,001 - $123,000
$194,001 - $246,000
$12.20 + Plan Premium
$123,001 - $153,000
$31.50 + Plan Premium
$153,001 - $183,000
$306,001 - $366,000
$50.70 + Plan Premium
$183,001 - $499,999
$366,001 - $749,000
$70.00 + Plan Premium
$76.40 + Plan Premium
If your income falls within these ranges, you'll be required to pay an additional amount for your Medicare Part B and Part D premiums. Each year, the income thresholds can change, which may impact whether you're subject to IRMAA. Each year, the incomes will be adjusted for inflation (CPI-W).
How to Appeal IRMAA
If you believe that you have been wrongly assessed IRMAA, for any reason, such as an error on your tax return, or a life-changing event, then you can appeal the decision with the SSA using form SSA-44.
Life-changing events include:
- Death of a spouse
- Job loss
- Reduction in work hours
You'll need to provide documentation to support your appeal, such as proof of the life-changing event or an amended tax return. If your appeal is successful, your IRMAA may be reduced or eliminated.
How to Reduce IRMAA
Careful planning in advance may allow you to minimize the impact of IRMAA. You may want to seek professional guidance as the financial ramifications can be significant and long-lasting. You may want to pursue a careful balance between your finances and your ability to access the healthcare services that you want or need.
Since IRMAA is based on your income and not the amount of financial resources you have, finding ways to strategically manage your income can help you avoid or reduce the additional amount you must pay. Some ways to manage your income include:
- Postponing capital gains. Delaying the realization of capital gains by postponing the sale of assets that have appreciated in value. This can also include distinguishing between short-term and long-term capital gains, and tax-loss harvesting. A financial advisor who understands tax-efficient investing or a tax expert may be able to assist.
- Tax-deferred accounts. Using tax-deferred investment vehicles, such as 401(k)s, IRAs, HSAs, and annuities to lower your taxable income. Adjusting the timing of withdrawals from retirement accounts to minimize the impact on your MAGI.
- Use of Roth IRAs. This can be in the form of a Roth IRA conversion (which would create a taxable event in the year that you converted from an IRA to a Roth IRA or withdrawals from a Roth IRA). These could be used in a strategic manner, to avoid spikes in taxable income, especially for those that are deferring the receipt of Social Security benefits.
- Annuities. Annuitizing an existing annuity, because of the exclusion ratio (non-taxable portion) of the payments that you will receive.
These possible strategies may require a deep understanding of the interaction among financial markets, Medicare, and taxation issues. You may want to consider an advisor that has a working knowledge of the intersection of these issues.
Navigating Medicare and its impact on your finances can be complex, but understanding the financial assistance programs available to you and the Income-Related Medicare Adjustment Amount (IRMAA) is crucial. Financial assistance programs such as Medicaid, Medicare Savings Programs (MSPs), Extra Help, and State Pharmaceutical Assistance Programs (SPAPs) can provide support for Medicare beneficiaries with various expenses. However, eligibility criteria and benefits differ among these programs.
IRMAA is an additional cost for individuals with higher incomes, which can be managed through careful financial planning. By becoming familiar with these topics and seeking professional guidance, you can better manage your healthcare costs and ensure your financial well-being.
If you’re in need of Medicare help for seniors, OpenMedicare is here to provide Medicare assistance and guide you through every step of the process. Please contact us at (844) 910-2061 to be connected with a licensed insurance agent who can answer any questions you may have!
Please note that we do not always offer every available plan in your area. As a result, any information we provide is limited to the plans we offer in your area. Please contact Medicare.gov or 1–800–MEDICARE for more information on your options.