What Is Medicare Extra Help?
- Medicare Extra Help assists low-income seniors with prescription drug costs that aren't covered by Medicare Part D. Find out what you need to know about Medicare Extra Help.
Medicare Part D benefits do not cover every out-of-pocket cost seniors pay at the pharmacy, which can lead to potentially significant cost gaps that seniors on fixed or limited incomes may struggle to meet.
Medicare Extra Help (also called the Medicare Low-Income Subsidy, or LIS) is an assistance program that helps pay for the major out-of-pocket costs of prescription medications that Medicare Part D plans don’t cover. Eligibility is limited to seniors who meet the Extra Help income limits, or who are enrolled in another qualifying assistance program.
How Does Medicare Pay for Prescription Drugs?
Medicare is the main federal health insurance program for qualifying older adults in the United States. Medicare Part D was created in 2006 and offers prescription drug benefits, which help millions of beneficiaries pay for their medication through privately offered health insurance carriers.
Part D plans are issued by private insurance providers that set their own monthly premiums and deductibles. In 2020, the maximum annual deductible an authorized Part D plan can charge is $435. Many carriers offer plans with substantially lower deductibles, including some $0 deductible plans, though these plans may come with relatively high monthly premiums.
After the yearly deductible is met, Part D plans pay their share of enrollees’ drug costs, up to the 2020 limit of $4,020. After that, in the coverage gap, or “donut hole," benefits drop off and beneficiaries may have to pay 25% of their total medication costs for brand-name and generic drugs.
Inside the coverage gap, prescription drugs are usually available at steep discounts, up to 75% off, to help Medicare enrollees get through to the maximum annual out-of-pocket cost for Part D. This is $6,350 in 2020, after which Medicare’s catastrophic coverage stage kicks in to pay most of a beneficiary’s remaining medication costs for the remainder of the year.
Medicare Extra Help Benefits
Extra Help steps in to help pay the out-of-pocket costs most Medicare Part D plans don’t cover.
Extra Help beneficiaries whose income and assets qualify them for Extra Help may have their entire monthly premium payment, full deductible and other costs paid for by the Medicare low-income subsidy program.
Enrollees who earn higher than the minimum income may be asked to pay some of their uncovered costs, but all program participants get some relief from Medicare prescription drug costs.
Who Is Eligible for Extra Help?
Extra Help is available for Medicare beneficiaries with qualifying income and assets.
Some Medicare enrollees are automatically enrolled in Extra Help. Medicare beneficiaries who receive Social Security Income (SSI) benefits and Medicare beneficiaries who also have Medicaid automatically get Extra Help.
To be eligible to apply for Extra Help, beneficiaries must be enrolled in Medicare and earn less than $19,140 a year as individuals, or less than $25,860 for married couples. Countable assets must not exceed $14,610 for an individual applying alone, or $29,160 for a married couple. Income may be from any source, but countable assets refers to a limited range of personal property.
The Social Security Administration does not count certain assets toward beneficiaries’ limits.
Protected resources include:
- A single home, if it is a primary residence
- Personal possessions
- A single vehicle
- Furniture, jewelry and other items that are not easily converted into cash
- Property that is needed for self-support, such as a rental property or land used as a personal garden
- Life insurance policies
- Burial expense plans and burial plots
- Interest earned on any uncountable asset
The Social Security Administration also doesn’t count certain types of income when calculating eligibility for Extra Help. Protected types of income include:
- Supplemental Nutrition Assistance Program (SNAP), also called Food Stamps
- Low-income housing assistance such as Section 8
- Home energy assistance (LIHEAP)
- Disaster assistance
- Tax credits such as the earned income credit
- Personal bequests from other people that are used to pay household expenses
- Victims’ compensation grants
- Scholarships, grants and other educational funds
Older adults with qualifying income can submit an Extra Help application through the Social Security Administration, along with proof of eligibility, which can include an official letter stating your enrollment in a low-income assistance program.