Medicare offers different levels of low-income subsidies, called "Extra Help," to help pay for the cost of prescription drugs above and beyond what a standard Part D prescription drug plan pays. To qualify, you need to be receiving Medicare and have low income and assets. "Extra Help" will cover most of your prescription costs and sometimes also your Medicare Part D premiums. Social Security estimates that the Extra Help program can save people about $4,000 per year.
Levels of Part D Extra Help
There are four categories of people who qualify for the Extra Help program. The categories are defined by the Medicare recipient's income in relation to the Federal Poverty Guideline (FPG), or federal poverty level (FPL). In 2012, the FPG for a single person was an annual income of less than $11,170 ($12,860 in Hawaii, $13,970 in Alaska). For larger family units (people related by blood, marriage, or adoption and living together), the figure goes up by about $4,000 per person (about $4,550 per person in Hawaii, about $5,000 per person in Alaska). FPG amounts go up slightly each year; to find the current amounts for this year, see Nolo's article on the federal poverty level.
The amount of Extra Help a beneficiary receives varies with the category.
Category One. This category includes individuals eligible for Medicaid whose income is under the FPG. They pay no premium or deductible, have no gap in coverage, and have reduced per-prescription copayments.
Category Two. This category includes individuals eligible for Medicaid but with incomes above the FPG. They pay no premium or deductible and have no coverage gaps, but pay a higher per-prescription copayment than other Medicaid recipients.
Category Three. This category includes individuals not eligible for Medicaid but with income less than 135% of the FPG and assets (not including a home) of less than about $6,940 (about $10,410 for a married couple living together). They pay no premium or deductible, have no gap in coverage, and have reduced per prescription copayments.
Category Four. This category includes individuals with incomes of 136% to 149% of the FPG and assets less than $11,570 ($23,120 for a married couple). They pay a reduced premium and deductible and have reduced per-prescription copayments.
Individuals in categories 1, 2, or 3 will also qualify for one of the Medicare Savings Programs, which pay Medicare Part A and/or Part B deductibles.
Enrollment Timing for Extra Help Beneficiaries
If you are eligible for one of the Part D Extra Help low-income subsidy programs but are not a Medicaid beneficiary, you can enroll in a Part D plan at any time, directly with the Part D plan of your choice. If the plan doesn't suit your needs, you may switch to another plan once a year, but the switch must happen during an open enrollment period (from November 15 to December 31 each year).
If you are a Medicare and Medicaid beneficiary, and you qualify for Extra Help, you must enroll in a plan whose premium is at or below your state’s average. If you enroll in a plan with a premium higher than the state average, you will be responsible for the extra premium cost out of your own pocket.
If you don’t enroll in a Part D plan on your own (and you are a Medicaid recipient), the Medicare program will automatically enroll you in a plan with a premium below the state’s average. And if that plan doesn’t fit your needs for drug coverage, you may switch plans at any time.
Applying for Extra Help
Note that you must apply for Extra Help separately from enrolling in a Part D plan. If you think you are anywhere close to qualifying for a Part D low-income subsidy, you should apply for it. Applying for this low-income subsidy does not commit you to join any Medicare Part D plan. If you are accepted for Extra Help, your Part D plan premium will be much less expensive regardless of which plan you choose.
You apply for Extra Help by sending an application to the Social Security Administration (SSA) rather than to Medicare or to a Part D plan. Contact the SSA to get an Extra Help application and instructions. You can reach the SSA toll-free at 800-772-1213, or visit Social Security's Extra Help with Prescription Drug Plan Costs at http://www.ssa.gov/prescriptionhelp/ to file an application online. In person, you can apply at a Social Security office near you. Or, you can also apply for Extra Help at a local county Social Services office or other local government office in your state that processes Medicaid applications. Free one-on-one help is available at your local SHIP or HICAP office. These programs have trained counselors on staff to help you with your application.
If your application for Extra Help is approved, the subsidy will be retroactive to the date you first applied. Once approved, your Extra Help will remain in effect for one year. Within the first year of your Extra Help, the Social Security Administration will review your finances to see if you still qualify. If so, your Extra Help will be automatically renewed. After the first year, SSA will review your financial status periodically.
Enrolling in a Part D Plan
Private insurance companies administer each Part D plan using their own enrollment forms and procedures. Some plans may permit you to enroll online, while others may require written forms. You must contact the plan directly to find out the details of their coverage and costs, and to enroll in the plan.
Your Part D plan will cover the cost of your medications only after you have completed enrollment in the plan and your Medicare Part A or B coverage has begun. This means that any drugs you buy while your application is pending will not be covered. It is therefore a good idea to decide on a plan and submit an application in the months before you become eligible for Medicare, so that coverage will begin as soon as you are eligible.
If you do not enroll in a Part D plan when you are first eligible for it, your premiums will be higher when you do finally enroll. Medicare charges an additional 1% for each month you delay enrolling. So, if you intend to enroll in a Part D plan as soon as you are eligible for Medicare, you should do the paperwork ahead of time. This will ensure not only that your coverage begins immediately, but also that you will not have to pay a higher premium because of a simple paperwork delay.
For more information on Part D, see our section on Medicare Part D.