Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.
When Tom Tierney turned 65 this year, he had to ditch his Affordable Care Act (ACA) healthcare 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 which he spends carefully in hopes of making them last throughout his life.
High Medicare costs threaten Tierney’s plan.
Many seniors mistakenly believe that because Medicare provides universal coverage, it is inexpensive. However, Medicare is expensive, even prohibitive, for half of Americans over 65 with incomes below $29,650 in 2019, according to the Kaiser Family Foundation. KFF also points out that one in four people lived on less than $17,000.
Like all Medicare participants, Tierney pays a monthly Part B premium of $170.10 in 2022, which is automatically subtracted from his Social Security. It also pays a one-time annual deductible of $233 in Part B.
Original Medicare also requires the purchase of Part D prescription drug coverage. The cost of Part D varies, but most have a $480 deductible, plus a monthly premium.
In total, Tierney’s full-year Medicare coverage costs, including premiums, deductibles, and surcharges to cover costs that Medicare does not pay: $5,058.20 or $421.52 per month
Compare that to the $2,136 he paid annually for Obamacare.
“It was a shock,” Tierney said. “I couldn’t believe I didn’t really have a choice.”
Tierney could have opted for a Medicare Advantage plan, managed by a private insurance company. But while the cost of Medicare Advantage plans may seem lower initially, there can be unexpected charges, and all Medicare Advantage plans have copayments and coinsurance.
The government offers financial assistance to people who already qualify for Medicaid in the form of Medicare Savings Programs (MSPs). But people like Tierney, who have a modest income that’s even a little above the federal poverty level or who have savings, may find it difficult to qualify for this assistance in most states.
Income Limits for Medicare Savings Programs
Below are the MSP programs, their income eligibility requirements, and what each program covers. You can see that in most cases the income caps are low.
Income limits are slightly higher in Alaska and Hawaii.
“The federal eligibility floor — those limits — is incredibly strict,” said Fred Riccardi, president of the Medicare Rights Center, a national nonprofit consumer and advocacy organization based in New York City.
Asset limits further restrict eligibility
To add to the issue of low income limits, another sticking point is the low asset limit, 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. (The 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 toward the asset limit.
These things don’t count:
- A house
- A car
- A burial ground
- Up to $1,500 for burial expenses if money is specifically earmarked
- Other household and personal items
Asset limits are counterproductive, says Ann Kayrish, senior Medicare program manager for the National Council on Aging (NCOA). “All your life you’ve been told, ‘Keep it for that rainy day.’ There you go, you did it and you get penalized for it,” she said. “What happens to people with no savings when their roof collapses or their car breaks down?”
The Medicare Rights Center recently led a successful legislative effort to expand eligibility in New York State by eliminating the asset limit. The other big state to make this change is California, where asset limits have been raised to $130,000 for a single person and $195,000 for a couple.
Other states that have eliminated the asset limit are Alabama, Arizona, Connecticut, Delaware, Louisiana, Mississippi, Oregon and Vermont, as well as the District of Columbia.
Additional Barriers to Qualifying for an MSP
The application process for MSP programs is even more complicated, Kayrish says, because many states require information and proof about your assets. “For example, some states require you to provide a copy of your life insurance policy’s cash value. In some states, the full application is 15 to 22 pages,” she says.
And don’t even think about lying. When a person applies for MSP, they typically have to sign a form stating that they must report any changes in income/financial status to the state Medicaid agency, writes Brandy Bauer, director of the Medicare Improvements for Patients and Providers program. NCOA Act, in an email.
“If they don’t [report] and the state later finds out about a sudden windfall or change in income (e.g. when it’s time to renew/recertify the benefit), not only can you be kicked out of the benefit, but the state could sue the refund,” writes Bauer. .
New hope for lower health insurance prices
According to Kaiser Family Foundation research, health savings programs and the Part D low-income grant primarily help beneficiaries from communities of color, people with disabilities under age 65, and women with lower incomes. weaker.
The Biden administration has made efforts to expand MSP eligibility to include high-needs people who don’t meet income limits. Biden advocated allowing Medicare to negotiate drug prices and urged reducing the monthly Part B premium. Both of these changes would reduce costs for all Medicare participants, but especially those who pay a high percentage. of their health care income.
In June, the administration announced a new plan to improve cancer care for Medicare patients. It lowers health care costs and includes premium payments to oncology practices that agree to provide enhanced services to people who are eligible for both Medicare and Medicaid — double eligible, in government parlance.
How to Get Medicare Help for Yourself or Someone Else
Don’t be discouraged by the complexity of an MSP application.
The National Council on Aging (NCOA) has a helpful website that explains eligibility requirements for all 50 states and the District of Columbia. This will get you started.
Centers for Medicare and Medicaid Services (CMS) offers a step-by-step guide to applying. He acknowledges that this process is not straightforward, but urges people to apply and not give up too quickly.
Plus, the State Health Insurance Assistance Program (SHIP) will guide you through the process. This free, government-funded service is available in all states, as well as Puerto Rico, Guam, the District of Columbia, and the US Virgin Islands.
It may also be a good idea for Medicare participants in financial difficulty to switch plans. Carefully study what is available and see if you can find a better option. There are two times you can do this:
- Registration open: You can join, switch, or drop a plan each year from October 15 through December 7. New coverage begins January 1.
- Medicare Advantage Open Enrollment Period: If you already have a Medicare Advantage plan, each year from January 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 period .
How caregivers, family and friends can help
An immediate reaction for some people who want to support loved ones might be to step in and manage their income and assets, so recipients don’t have too much money to qualify for an MSP.
For example, some people consider transferring their loved one’s savings into someone else’s name or buying an immediate annuity so that only a small amount is available each year.
“It doesn’t matter how you do it, because the truth is that ultimately it will be reported (to the IRS) as income,” says NCOA’s Kayrish.
Kayrish cautions against wading around without understanding the rules. For example, leaving money to a low-income relative in a will or as a gift may affect their eligibility for MSP.
“In-kind support” is best, she advises. “Tell your friend or family member, ‘I’ll pay your rent. I’ll buy your groceries. Don’t write them a check and don’t deposit it in their bank account. Simply make the purchase or pay the bill directly.