Extra Help Subsidy for Medicare Part D Prescription Drug Plans

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 an average of $5,300 per year.

What Are the Benefits of the Low-Income Subsidy for Medicare?

Depending on your income, you may qualify for full or partial Extra Help. Extra Help can pay all or part of your Part D monthly premium and the deductible your plan charges. Without assistance, Part D premiums average about $30 per month, and the annual deductible can be as high as $505 per year.

With Extra Help, your copays for prescription medication will be reduced as well. If you delayed enrolling in a Part D drug plan, Extra Help also eliminates the Part D late enrollment penalty. (If you don't enroll in a Part D plan when you are first eligible for it, your premiums can be permanently higher when you do finally enroll.)

Who Qualifies for Extra Help With Medicare?

To qualify for Extra Help, you need to be entitled to Medicare Part A or Part B and have an annual income of less than 150% of the Federal Poverty Guideline (FPG), or federal poverty level (FPL), for the previous year.

In 2023, the FPG for a single person is an annual income of less than $14,580 ($16,770 in Hawaii and $18,210 in Alaska). For larger family "units" (people related by blood, marriage, or adoption and living together), the figure goes up by $5,140 per person ($5,910 in Hawaii and $6,430 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.

Assets (not including a home or household goods) must be less than $16,660 ($33,240 for a married couple).

Some Medicare recipients are automatically eligible for full Extra Help (and usually don't need to apply for the benefit). Anyone who is eligible for any of the following government benefits automatically qualifies for Extra Help:

• SSI (Supplemental Security Income)
• Medicaid with Medicare (also called "dual eligible"), or
• Medicare Savings Programs, which pay the deductibles for Medicare Part A and/or Part B (such as Qualified Medicare Beneficiaries, or QMB).

If you automatically qualify for Extra Help because you're receiving one or more of these benefits, Medicare will automatically enroll you in a Medicare Part D drug plan if you don't have one already.

Levels of Extra Help Benefits

There are several categories of people who qualify for Extra Help with Medicare, and the amount of Extra Help a Medicare recipient receives varies with the category. The categories are defined by the Medicare recipient's income in relation to the Federal Poverty Guideline (FPG), or federal poverty level (FPL), for the previous year.

Full Extra Help

If you qualify through your eligibility for one of the above programs like SSI or Medicaid, you'll receive "full" Extra Help. That means you'll pay no premium and no deductible for Part D, and you'll have low per-prescription copays. You also won't have to pay any copays after reaching the "donut hole" coverage gap (when you and your drug plan spend more than $7,400 in a year).

The same benefits apply if you don't qualify for Medicaid but:

• you have less than $10,590 in assets (as an individual) or less than $16,630 in assets (as a couple), and
• your income is less than 135% of the FPG. (In 2023, this means an income of less than $1,616 a month for an individual and $2,185 a month for a couple.)

Partial Extra Help

If your assets are somewhat higher, you can qualify for "partial" Extra Help. There are several levels of partial Extra Help:

The first level is for individuals who have:

• assets less than $16,660 (as an individual) or $33,240 (as a couple), and
• incomes under 135% of the FPG. (In 2023, this means an income of less than $1,616 a month for an individual and $2,185 a month for a couple.)

People in this group pay no monthly Part D premium and get reduced copayments, but their Part D plan can charge them a yearly deductible of up to $104.

The other levels of Extra Help are for individuals with income that's somewhat higher than 135% of the FPL. They can still qualify for some partial Extra Help, but they have to pay a portion of the Part D monthly premium.

Individuals in this group include those with:

• assets less than $16,660 (as an individual) or $33,240 (as a couple), and
• incomes of 136% to 149% of the FPG. (In 2022, this means an income of less than $1,823 for an individual and $2,465 for a couple.)

People in this group pay a monthly premium (reduced to 25% - 75% of the regular premium, depending on income). Also, their Part D plan can charge them a yearly deductible of up to $104, and they do get reduced copayments.

Enrollment in Part D for Extra Help Beneficiaries

If you're eligible for the Part D Extra Help low-income subsidy program but aren't a Medicaid beneficiary, you can enroll in a Part D plan at any time, directly with the Part D plan of your choice.

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.

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're "dually eligible" for Medicare and Medicaid, 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 paying the extra premium cost out of your own pocket.

If you don't enroll in a Part D plan on your own (and you're 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

Unless you're eligible for Medicaid and Medicare, you must apply for Extra Help separately from enrolling in a Part D plan. If you think you're anywhere close to qualifying for a Part D low-income subsidy, you should apply for it. Applying for this low-income subsidy for Medicare doesn't commit you to join any particular Medicare Part D plan. If you're accepted for Extra Help, your Part D plan premium should be less expensive regardless of which plan you choose.

You can apply for Extra Help online at Social Security's page for Extra Help with Prescription Drug Plan Costs. Or you can send in an application to the Social Security Administration (rather than to Medicare or to a Part D plan). Contact Social Security to get a Medicare Extra Help application and instructions. You can reach the SSA toll-free at 800-772-1213, or you can apply at a Social Security office near you.

Free one-on-one help is available at your local SHIP (State Health Insurance Assistance Program) or HICAP (Health Insurance Counseling and Advocacy Program) 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 you do, your Extra Help will be automatically renewed. After the first year, SSA will review your financial status periodically.

Timing Your Enrollment in a Part D 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. So it's 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.

Also, Medicare Part D charges an additional 1% in premiums for each month you delay enrolling. While the Extra Help subsidy can remove this penalty, you should still enroll in a Part D plan as soon as you're eligible for Medicare, in case you don't qualify for Extra Help. For more information on Part D, see our section on Medicare Part D.

_{Updated February 1, 2023}