Do You Have to Pay Back Medicare or Medicaid if You Win the Lottery?

Christian Worstell
In this article...
  • What happens to your Medicare, Medicaid, Social Security or other benefits if you win the lottery? Learn how winning a big cash prize can affect your benefits and find out what you need to do if you win the lottery.

Winning the lottery is sure to change a lot of things about your life. But will Medicare, Medicaid and Social Security be among them?

Will I Lose My Medicare Benefits if I Win the Lottery?

If you win the lottery, you will not lose your Medicare benefits or eligibility. You may still earn money while on Medicare, and there are no income limits that pertain to Medicare eligibility. There is also no requirement to pay Medicare back for any services received under this scenario.

However, your monthly premium for Medicare Part B may increase two years after winning a big cash prize. Medicare Part B charges a standard monthly premium of $148.50 (in 2021), which applies to most beneficiaries. However, if the modified adjusted gross income (MAGI) you report on your tax return in one year is above a certain amount, you will pay a higher premium for your Part B coverage two years later.

The rule is called the Income-Related Monthly Adjusted Amount, or IRMAA. Medicare uses your income from two years prior to determine whether the Medicare IRMAA applies to you. So, if you won the lottery in 2021, you may likely pay a higher premium because of IRMAA in 2023.

The highest Part B premium due to IRMAA is $504.90 per month (in 2021). This amount applies to those who filed an individual tax return for 2019 showing at least $500,000 in modified adjusted gross income, a joint return showing at least $750,000, or a married but separate return showing at least $412,000 of modified adjusted gross income.

If you took your lottery winnings as a lump sum, the IRMAA rule might only apply to you for one year. But if you took your winnings as monthly or annual payments, the IRMAA rule might apply to you for every year your modified adjusted gross income is above the stated limits.

IRMAA also applies to Medicare Part D prescription drug plans.

Learn more about IRMAA and see a breakdown of all the income and monthly premium categories.

Am I Still Eligible for Medicaid if I Win the Lottery?

You will likely forfeit your eligibility for Medicaid after winning the lottery. Medicaid eligibility rules vary by state, but most states use income and assets as a measure of your eligibility for the program. Any significant lottery win may likely push your income above the eligibility limit in most states.

Medicaid income limits are usually based on current monthly income. So, if you won the lottery and received your winnings as a lump sum, you would lose eligibility temporarily, but you might be able to gain it back again over time.

Medicaid recognizes lottery winnings of less than $80,000 as income only in the month it was received. Winnings between $80,000 and $90,000 are counted as income over two months and every additional $10,000 of winnings beyond that adds one more month to the period that is counted as income, with a maximum period of 120 months (which would apply to winnings of $1,260,000 and above).

Lottery winnings that are not spent are then counted as savings, which is one of the additional assets typically used to determine eligibility and which could further extend your period of ineligibility for Medicaid. You may be able to regain your Medicaid eligibility by spending all of your winnings on your primary home, art or other assets not counted by Medicaid. However, it may be unlikely you would need Medicaid benefits anyway if you were to win a significant amount of money in the lottery.

If your lottery winnings were not reported to Medicaid and you continued to receive Medicaid benefits after receiving your lottery winnings, you will be required to pay Medicaid back for any services and benefits you received during that period of ineligibility. 

In 2017, a bill was introduced that would strip away Medicaid eligibility for anyone winning $80,000 or more in a lottery or gambling. The bill never advanced out of the House of Representatives, however.

Will My Social Security Benefits Be Reduced If I Win the Lottery?

If you are under your full retirement age and are collecting Social Security benefits while still earning an income, your benefits will be reduced.

However, lottery winnings are not subject to this rule. Your Social Security benefits will not be reduced as a result of winning the lottery, regardless of whether or not you have reached your full retirement age.

Are Lottery Winnings Considered Earned Income?

Lottery winnings are considered taxable income for both federal and state tax purposes and must be reported as such. Lottery winnings are taxed the same as a wage or salary, regardless of whether the winnings are taken as a lump sum or an annuity.

Lottery winnings of more than $5,000 are reported to the Internal Revenue Service (IRS) by the lottery agency. Winnings of less than $5,000 are the responsibility of the winner to report on their taxes.

What Happens If You Win Money While on Benefits?

Most states do not consider gambling or lottery winnings as earned income for the purposes of unemployment benefits. So, if you win the lottery while collecting unemployment, your benefits will not be affected.

Lottery winnings do not affect Social Security disability income (SSDI), but it can reduce or eliminate any Supplemental Security Income (SSI).

Some states have laws in place that remove people from public assistance programs such as food stamps or other welfare programs if they win the lottery.

Christian Worstell
About the Author

Christian Worstell is a licensed insurance agent and a Senior Staff Writer for HelpAdvisor.com. He is passionate about helping people navigate the complexities of federal benefits and understand their coverage options.

His work has been featured in outlets such as VoxMSN, and The Washington Post, and he is a frequent contributor to health care and finance blogs.

Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. He currently lives in Raleigh, NC.

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