How The Medicare Savings Program Works For Low-Income Seniors – Forbes Advisor

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When Tom Tierney turned 65 this year, he had to let go of his Affordable Care Act (ACA) health care policy, an all-inclusive plan that cost him $178 a month, in favor of a much more expensive Medicare plan.

Like many retirees, Tierney has a modest monthly income and some savings that he spends carefully in hopes of making it last throughout the rest of his life.

High Medicare costs threaten Tierney’s plan.

Many seniors mistakenly believe that because Medicare provides universal coverage, it’s inexpensive. However, Medicare is costly, if not prohibitive, for the half of Americans over age 65 with incomes below $29,650 in 2019, according to the Kaiser Family Foundation. KFF also points out that one in four was living on less than $17,000.

Like all Medicare participants, Tierney pays a Part B monthly premium of $170.10 in 2022, which is subtracted automatically from his Social Security. He also pays a one-time annual $233 Part B deductible.

Original Medicare also requires purchasing Part D prescription drug coverage. The cost for Part D varies, but most have a $480 deductible, plus a monthly premium.

In all, Tierney’s full-year Medicare coverage costs, including premiums, deductibles, and supplements to cover costs Medicare doesn’t pay: $5,058.20 or $421.52 a month

Compare this to the $2,136 he paid for Obamacare annually.

“It was a shock,” Tierney said. “I couldn’t believe that I really didn’t have much of a choice.”

Tierney could have opted for a Medicare Advantage plan, managed by a private insurance company. But while the cost for Medicare Advantage plans may seem lower initially, there can be unexpected charges, and all Medicare Advantage plans have copays and coinsurance.

The government offers financial help for people who already qualify for Medicaid in the form of Medicare Savings Programs (MSPs). But people like Tierney, who have a modest income that is even a little higher than the federal poverty level or who have some savings, may find qualifying for this assistance difficult in most states.

Income Limits for Medicare Savings Programs

Below are the MSP programs, their income eligibility guidelines and what each program covers. You can see that in most cases, the income limits are low.

Income limits are slightly higher in Alaska and Hawaii.

“The federal floor of eligibility—these limits—are incredibly stringent,” said Fred Riccardi, president of the Medicare Rights Center, a national nonprofit advocacy and consumer organization based in New York City.

The Medicare Rights Center recently spearheaded a successful legislative effort to raise income eligibility limits in New York state.

Asset Limits Further Restrict Eligibility

To add to the issue of low income limits, another sticking point is low asset limits, the maximum amount a person can have in savings, investments and real estate.

In most states, the asset limit is $8,400 for an individual and $12,600 for a married couple. (Asset limits for the QDWI program are $4,615 for an individual and $6,189 for a married couple.)

Stocks, bonds and cash in checking and savings accounts all count against the asset limit.

These things don’t count:

  • A home
  • One car
  • A burial plot
  • Up to $1,500 for burial expenses if the money is specifically earmarked
  • Furniture
  • Other household and personal items

Asset limits are counterproductive, says Ann Kayrish, senior program manager for Medicare for the National Council on Aging (NCOA). “Your whole life you’re told, ‘Save for that rainy day.’ Here you are, you did it and you are being penalized for it,” she says. “What happens to people with no savings when their roof collapses or their car breaks down?”

Some states have eliminated the asset limit: Alabama, Arizona, Connecticut, Delaware, Louisiana, Mississippi, Oregon and Vermont, plus the District of Columbia. California raised asset limits to $130,000 for a single person and $195,000 for a couple.

Additional Barriers to Qualifying for an MSP

The application process for MSP programs is further complicated, Kayrish says, because a lot of states require information and proof about your assets. “For instance, some states require that you provide a copy of the cash value of your life insurance policy. In some states, the full application is 15 to 22 pages long,” she says.

And don’t even think about lying. When someone applies for an MSP, they usually have to sign a form that says they must report any change in income/financial circumstances to the state Medicaid agency, writes Brandy Bauer, the director of NCOA’s Medicare Improvements for Patients and Providers Act program, in an email.

“If they do not [report] and the state later finds out about a sudden windfall or change in income (for example, when it’s time to renew/recertify the benefit), you may not only be kicked off the benefit, but the state could pursue back payment,” Bauer writes.

New Hope for Lower Medicare Prices

Both the Medicare Savings Programs and Part D Low-Income Subsidy primarily help beneficiaries in communities of color, people younger than 65 with disabilities, and women with the lowest incomes, according to Kaiser Family Foundation research.

The Biden administration has made efforts to broaden eligibility for MSPs to include people with high need who don’t meet the income limits. Biden has argued for allowing Medicare to negotiate drug prices, and has encouraged reducing the Part B monthly premium. Both of these changes would lower costs for all Medicare participants, but particularly for those who are paying a high percentage of their income in healthcare costs.

In June, the administration announced a new plan to improve cancer care for Medicare patients. It cuts healthcare costs and includes bonus payments to oncology practices that agree to provide enhanced services to people eligible for both Medicare and Medicaid—dual eligible, in government parlance.

How to Get Medicare Help for Yourself or Someone Else

Don’t be discouraged by the complexity of applying for an MSP.

The National Council on Aging (NCOA) has a helpful website that explains eligibility requirements for all 50 states and the District of Columbia. It will get you started.

Centers for Medicare and Medicaid Services (CMS) offers a step-by-step guide to applying. It acknowledges that this process isn’t simple, but urges people to apply and not give up too quickly.

In addition, the State Health Insurance Assistance Program (SHIP) will walk you through the process. This free government-funded service is available in every state, plus Puerto Rico, Guam, the District of Columbia, and the U.S. Virgin Islands.

It may also make sense for financially strained Medicare participants to switch plans. Study what’s available carefully and see if you can find a better option. There are two times you can do that:

  • Open enrollment: You can join, switch or drop a plan annually from Oct. 15 to Dec. 7. New coverage starts Jan. 1.
  • Medicare Advantage open enrollment period: If you already have a Medicare Advantage Plan, every year from Jan. 1 to March 31, you can switch to a different Medicare Advantage Plan or switch to Original Medicare (and join a separate Medicare drug plan) once during this time.

How Caregivers, Family and Friends Can Help

An immediate reaction by some people who want to support their loved ones might be to step in and manage income and assets, so recipients don’t have too much money to qualify for an MSP.

For instance, some people consider moving their loved one’s savings into someone else’s name or buying an immediate annuity so only a small amount is available annually.

“It doesn’t really matter how you do it because the truth is, ultimately, it’s going to be reported (to the IRS) as income,” NCOA’s Kayrish says.

Kayrish warns against wading in without understanding the rules. For instance, leaving a low-income relative money in a will or as a gift can affect their MSP eligibility.

“In-kind support” is better, she advises. “Tell your friend or family member, “I’m going to pay your rent. I’m going to buy your groceries. Don’t write them a check and deposit it in their bank account. Just make the purchase or pay the bill directly.”

Correction: In the original story, we said that the Medicare Rights Center spearheaded an effort to eliminate the asset limit in New York state. The effort was to increase income eligibility. We regret the error. 

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