How a Medicare Savings Program Could Cut Your Health Care Costs

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Medicare isn’t cheap and it doesn’t cover all your health care costs.

The standard Part B premium — which pays for things like medical equipment and doctor visits — is $170.10 per month in 2022. That’s on top of an annual $233 Part B deductible, plus a $1,556 Part A deductible if you’re admitted to the hospital.

Nearly all Medicare beneficiaries are also enrolled in private Part D prescription drug coverage, either by way of a standalone Part D plan or an “all-in-one” Medicare Advantage plan.

Costs for Part D plans vary, but the average yearly deductible was $233 in 2021, plus an average monthly premium of $26, according to the Kaiser Family Foundation.

If you’re struggling to afford Medicare, you’re not alone. Special savings programs can help.

In this guide, we’ll break down everything you need to know about these money-saving Medicare programs, including eligibility requirements and how to apply.

Need a refresher on Medicare? Check out these 7 frequently asked questions on how Medicare works

What Is a Medicare Savings Program?

Beneficiaries with limited income and assets can qualify for financial assistance from Medicare Savings Programs (MSPs).

These programs can cover your Medicare premiums (Part A and Part B), and some may cover Medicare deductibles, coinsurance and copayments.

Medicare Savings Programs are a specific subset of Medicaid benefits that help pay for Medicare costs.

The four Medicare Savings Programs are: 

  • Qualified Medicare Beneficiary (QMB) Program
  • Specified Low-Income Medicare Beneficiary (SLMB) Program
  • Qualifying Individual (QI) Program
  • Qualified Disabled and Working Individuals (QDWI) Program

Only about half of Medicare beneficiaries eligible for a Medicare Savings Program are currently enrolled in one, according to the U.S. Centers for Medicare & Medicaid.

That makes sense — signing up for these programs can be confusing and difficult.

Medicare Savings Programs are administered by the states. Generally, if you qualify for Medicaid, you also qualify for a Medicare Savings Program.

But you may still qualify for a savings program even if you make too much to qualify for full Medicaid benefits in your state.

Medicaid is an assistance program for people of all ages with lower incomes. Medicare is an insurance program mostly for people older than 65.

In 2019, 10.3 million beneficiaries received financial assistance through Medicare Savings Programs.

Of those, 7 million beneficiaries received full Medicaid benefits while 3.3 million only received premium and/or cost sharing assistance, according to the Kaiser Family Foundation.

For more information about eligibility requirements and asset limits, check out the chart below.  

What Is the Extra Help Program?

The Social Security Administration also offers a prescription drug assistance program called Extra Help for Medicare beneficiaries with limited incomes and resources.

This federal program helps pay your Medicare prescription drug plan premiums, annual deductibles and copayments.

Extra Help can significantly reduce your out-of-pocket prescription drug costs. It’s estimated to save enrollees about $5,100 per year.

If you qualify and enroll in Extra Help, you’re guaranteed to not pay more than $3.95 for each generic drug or $9.85 for each brand-name covered drug.

While Medicare Savings Programs are administered by the states, Extra Help is administered by the Social Security Administration.

You automatically qualify to get Extra Help if you qualify for the Qualified Medicare Beneficiary, Specified Low-Income Medicare Beneficiary or Qualifying Individual programs or Social Security Income (SSI).

Pro Tip

Trying to save money on things like eyeglasses, hearing aids or dental work? Our money-saving Medicare guides have you covered.

How Do You Apply for a Medicare Savings Program and Extra Help?

You’ll need to reach out to your State Medical Assistance (Medicaid) office to apply for a Medicare Savings Program. Only your state program can determine if you qualify.

Another way to apply is by submitting an application for the Extra Help program.

When you apply for Extra Help, the Social Security Administration sends information to your state Medicaid agency, which will contact you and help you apply for a Medicare Savings Program if you qualify.

This happens automatically unless you specifically tell the Social Security Administration not to send over information while applying for Extra Help.

You can complete the Extra Help application online or by calling the Social Security Administration at 1-800-772-1213.

Who Is Eligible for Medicare Savings Programs?

Even if your income or assets slightly exceed the limits described below, you should still apply with your state Medicaid office.

According to “If you have income from working, you still may qualify for these four programs even if your income is higher than the income limits listed.”

Keep in mind these are the federal guidelines. Several states apply different standards and methods to determine program eligibility.

What’s Included in the Medicare Savings Program Resource Limits?

To qualify for a Medicare Savings Program, you must have limited resources or assets, as well as limited income.

The following all count toward your resources:

  • Money in a checking or savings account
  • Stocks
  • Bonds
  • Real estate (besides your primary residence)

However, not all assets are considered counted when determining eligibility for a Medicare Savings Program.

These resources won’t count toward the limit: 

  • Your home
  • One car
  • Burial plot and up to $1,500 for burial expenses
  • Furniture
  • Other household and personal items

Ten states plus the District of Columbia have eliminated resource requirements: Alabama, Arizona, Connecticut, Delaware, Louisiana, Mississippi, New Mexico, New York, Oregon and Vermont.

Three other states — Minnesota, Massachusetts and Maine — have asset limits above the federal limits described above.

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Who Is Eligible for the Extra Help Program?

Income and resource limits for Extra Help are less restrictive than limits for Medicare Savings Programs.

That’s why you should apply for Extra Help even if you don’t think you’re eligible for other programs.

To qualify for Extra Help, your annual income must be limited to:

  • $20,385 for an individual or
  • $27,465 for a married couple living together.

Remember, some cash payments aren’t counted as income for Extra Help.

For example, the Social Security Administration won’t count SNAP (food stamp) benefits, housing assistance, home energy assistance, earned income tax credit payments or scholarships and education grants.

You May Still Qualify for Extra Help With a Higher Income

Even if your annual income is higher, you may still be able to get help paying for prescription drugs.

Some examples where your income may be higher and you can still qualify for Extra Help include if you or your spouse:

  • Support other family members who live with you.
  • Have earnings from work.
  • Live in Alaska or Hawaii.

What’s Included in Extra Help Asset Limits?

In 2022, your resources can’t exceed $15,510 for an individual or $30,950 for a married couple living together to qualify for Extra Help, according to Social Security.

The following count toward your resources:

  • Bank accounts including checking, savings and certificates of deposit.
  • Real estate (other than your primary residence).
  • Stocks, bonds and mutual funds.
  • Individual Retirement Accounts (IRAs).

The following assets do not count toward Extra Help resource limits:

  • Your primary residence.
  • Your personal possessions, including jewelry and furniture.
  • Your vehicle(s).
  • Property you need for self-support, such as rental property.
  • Non-business property essential to your self-support.
  • Life insurance policies.
  • Burial expenses.

Have Questions? Talk to a Nonprofit Medicare Counselor

Applying and enrolling in these programs isn’t easy for the average person.

If you need assistance applying for a Medicare Savings Program or Extra Help, there are nonprofit volunteers you can call.

The State Health Insurance Assistance Program (SHIP) is a network of trained nonprofit volunteers who provide 1-on-1 counseling about Medicare to beneficiaries and their families.

All SHIP advice and counseling is completely free. The program is federally funded and isn’t connected to insurance companies or health plans, so the advice you receive is unbiased.

These volunteers can see if you qualify for a money-saving program, help you submit an application and answer any questions you encounter along the way.

To get started, call your state’s SHIP information line. Click “SHIP locator” on the organization’s home page for a list of each state’s phone number.

The National Council on Aging also oversees a network of Benefits Enrollment Centers, which help connect Medicare beneficiaries with limited incomes to programs that pay for health care, food and other services.

About 85 agencies in 41 states operate as Benefits Enrollment Centers. You can find a list of nearby locations on the National Council on Aging website.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder.