New Law Makes More People Eligible for Part D Assistance
Income threshold raised for Medicare’s Extra Help program
Hundreds of thousands more low-income older adults will be eligible for financial help to better afford their prescription drugs, under a provision included in the Inflation Reduction Act of 2022.
The new law expands eligibility for Medicare’s Part D Low-Income Subsidy (LIS) benefit, also known as the Part D Extra Help program. Beginning in 2024, Medicare beneficiaries with annual incomes of up to 150 percent of the federal poverty limit ($20,385 for an individual in 2022) who also meet the program’s resources limit can qualify for full benefits under the Extra Help program. The income threshold for full benefits currently is 135 percent of the federal poverty guidelines ($18,347 for an individual in 2022).
The Extra Help program covers annual Part D premiums and deductibles and some copays and coinsurance costs. Individuals are responsible for modest copays for their drugs until their drug costs reach the catastrophic phase of Part D ($7,050 in 2022); after that they don’t pay anything for their medications. As of 2024, any Medicare beneficiary who enters the catastrophic phase will not have to pay anything more for their drugs. Starting in 2025 there will be an annual $2,000 cap on out-of-pocket expenses for everyone who gets their medications through a Part D or Medicare Advantage plan.
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Under the current Extra Help program, people whose incomes fall between 135 percent and 150 percent of the federal poverty guideline can qualify for a partial low-income subsidy, but that provision of the program will be eliminated once the higher income limit for the full benefit kicks in.
“Enrollees who switch from partial to full LIS benefits would likely see a meaningful reduction in their annual out-of-pocket costs,” says Leigh Purvis, AARP’s director of health care costs and access. An estimated 400,000 Medicare beneficiaries received partial assistance from the Extra Help program in 2020, according to the nonpartisan Kaiser Family Foundation. The foundation estimates that under the new law, annual out-of-pocket costs for these individuals could fall by nearly $300. “This provision will benefit low-income Black and Hispanic Medicare beneficiaries in particular, who are more likely than white beneficiaries to have incomes between 135 percent and 150 percent of poverty,” a KFF report says.
The low-income subsidy — or Extra Help — program is administered by the Social Security Administration (SSA). In addition to an annual income limit, the program includes a resources test. According to SSA, to qualify for Extra Help in 2022, an individual must have resources of less than $15,510; a married couple’s resources can’t be any more than $30,950. SSA has an online brochure that explains how the Extra Help program works and what assets are included in the resource limit. For example, an applicant’s bank accounts, retirement savings (IRAs, mutual funds, etc.) and real estate other than the home they live in are all included in the asset test. But the person’s car, insurance policies and personal possessions are not included.
Dena Bunis covers Medicare, health care, health policy and Congress. She also writes the “Medicare Made Easy” column for the AARP Bulletin. An award-winning journalist, Bunis spent decades working for metropolitan daily newspapers, including as Washington bureau chief for the Orange County Register and as a health policy and workplace writer for Newsday.