Medicare Part D drug coverage and financial Extra Help
If you are eligible for Medicare, you can enroll in a Medicare prescription drug plan through a stand-alone Medicare Part D prescription drug plan (PDP
) or Medicare Advantage plan that includes drug coverage (MAPD
). And if your income and assets are below certain levels (established every year based on the Federal Poverty Level (FPL), then you can also qualify for Medicare Part D Extra Help
(or Low-Income Subsidy (LIS
)) that will help you pay your monthly drug plan premium, deductible, and significantly lower your drug co-pays.
Medicaid and automatically qualifying for Extra Help
If you qualify for your state's Medicaid program, you will also automatically qualify for Medicare Part D Extra Help.
Applying for Extra Help
You can apply for the Medicare Part D financial Extra Help program at
any time throughout the plan year. Please contact your local Medicaid
office or the Social Security Administration for more information
Spending down to qualify for Medicaid
But, if your income is too high and you do not qualify for Medicaid at the beginning of the year, your state may still allow you to deduct your medical expenses (cost of doctor visits and prescriptions) from your income allowing you to meet the Medicaid limits and you then are granted Medicaid status, you will be automatically qualified for Medicare Part D Extra Help benefits. In other words, based on your medical expenses, you "spend down" your income to meet the Medicaid requirements.
Saving money with Part D Extra Help and losing Medicaid status
Ironically, Medicare Part D Extra Help will save you money on your prescription drug purchases and this savings can affect your Medicaid status by lowering your medical expenses and therefore, raising your “available income” above the Medicaid threshold for a given month or months. In such a situation, you may periodically lose your Medicaid benefits. But, even if you lose your Medicaid status, you will not lose your Extra Help benefits for the remainder of the year (through December 31st).
Medicaid Spenddown & Extra Help Guidance
The following is the Centers for Medicare & Medicaid Services (CMS) guidance on Medicare Part D Extra Help and Medicaid "Spenddown". This is a compilation of two versions of the same guidance document along with additional notation and emphasis added.
What do people with Medicare and Medicaid need to know about Medicare prescription drug coverage?
People qualified for both Medicare and Medicaid automatically qualify for extra help paying for Medicare prescription drug coverage - and this means people [who enroll into the Medicare Part D Extra Help
program] pay low or $0 monthly premiums, have no deductible or Coverage Gap, and pay only a small copayment when they fill prescriptions covered by their Medicare drug plan.
In very limited cases, Medicaid may cover certain drugs that aren't covered by Medicare prescription drug coverage. Except in these limited cases, Medicaid can't cover drugs for people who are enrolled, or who could be enrolled, in a Medicare drug plan [PDP or MAPD].
What’s a spenddown?
A person with Medicare whose income is too high to qualify for Medicaid might still be able to get Medicaid if their non-covered medical expenses or cost sharing (such as monthly premiums and initial deductible) are more than their available income. In this situation, most states allow a person to reduce their countable income by subtracting medical expenses and cost sharing from their income. When subtracting medical expenses and cost sharing lowers a person’s income to a level that qualifies them for Medicaid, this process is called a “spenddown.”
States can choose to set spenddown periods anywhere between 1 to 6 months. In states with a 1-month spenddown period, a person must spend down to the Medicaid limit each month to qualify for Medicaid that month (see example below).
How does Extra Help impact a person who qualifies for Medicaid through a spenddown?
When a person qualifies for Medicaid through a spenddown, they become eligible to enroll in Extra Help for the rest of the calendar year. The Extra Help the person gets will potentially lower the medical expenses they would otherwise use to meet their [Medicaid] spenddown limit. This [reduction in medical costs] might slow down the time it takes the person to meet their spenddown limit to qualify for Medicaid for the rest of the calendar year.
The example below shows how qualifying for Extra Help may affect a person who’s eligible for Medicaid through spenddown.
Month 1 - meets Medicaid limit through medication expense spenddown, qualifies for Extra Help
Julie has Medicare and gets $1,200 a month in Social Security.
Her $1,200 monthly income is too high for her to qualify for Medicaid in her state. Her state’s Medicaid income limit is $1,000 a month, which means she must have at least $200 a month in medical expenses to "spend down" to the state’s $1,000 a month Medicaid limit.
She pays $150 a month out-of-pocket for prescription drugs and $75 most months for doctor visits. This amounts to a total of $225 in medical expenses each month.
After Julie spends $200 in medical expenses during the month, she’s eligible for Medicaid for the rest of the month.
Medicaid pays the remaining $25 of her medical expenses, leaving her with $1,000 for other expenses. In addition, since she’s eligible for Medicaid, Julie automatically qualifies to enroll in Extra Help.
Julie’s Medicare Part D Extra Help will continue through the end of the calendar year, even if she doesn’t qualify for Medicaid in some later months because she has now lowered her medical expenses.
Summary of Month 1:
Based on her medical expenses, Julie reduces her income and now qualifies for Medicaid - and automatically qualifies for Extra Help paying Medicare prescription drug costs for the rest of the calendar year - and will keep the Extra Help even if she doesn’t qualify for Medicaid in some later months because she has lower medical expenses.
Month 2 - Extra Help reduces medical expenses and no longer meets Medicaid income limit, loses Medicaid, but keeps Extra Help
With Extra Help and a Medicare Part D drug plan, Julie pays no monthly premium, has no deductible, and pays only small copayments for her formulary medications.
Her Medicare Part D copayments will be $1 for each of her 10 generic prescriptions, for a total of $10. She spends $75 for her doctor visits, for a total of $85 in medical expenses.
Summary of Month 2:
Julie's medical expenses are no longer high enough to qualify for Medicaid (she doesn’t exceed her $200 limit under spenddown so her income is no longer under the $1,000 Medicaid limit). But the Extra Help she gets increases the monthly income available to her. She now has $115 ($1,200 - $85) available for other expenses, and this is $115 more than she had before getting the Extra Help.
Month 3 - additional medical expenses reduces income below Medicaid income limit, qualifies for Medicaid this month, and still has Medicare Part D Extra Help
During a month where Julie's medical expenses for items other than prescription drugs are over $200, she will again qualify for Medicaid
. For example, in Month 3, Julie has $210 in doctor visits and $10 in total prescription drug copayments, for a total of $220 in medical expenses.
Summary of Month 3:
Once again, Julie meets her $200 spenddown amount, reducing her income under the $1,000 Medicaid limit and qualifies for Medicaid for the month. In future month, she can qualify for the Medicaid program when she has higher (over $200) medical expenses.
What if a person is notified that he or she no longer qualifies for Extra Help as of January 1 next year?
Month with High Medical Expenses
Month with Low Medical Expenses
Month with High Medical Expenses
|Julie’s Medicaid Spenddown Requirement--$200 in Medical Expenses to reach the Medicaid $1000 in Monthly Income
|Julie’s Drug Spending
||$10 (with Extra Help)
|Other Medical Expenses
|Julie’s Total Medical Expenses
|Meets spenddown requirement and qualifies for Medicaid?
|Julie’s out-of-pocket spending for Medical Care
||$200 (Medicaid pays $25)
||$200 (Medicaid pays $20)
|Julie’s cash available for other expenses
Each fall, Medicare uses data from the states to decide whether a person will continue to automatically qualify for Extra Help for the coming year.
Using the example above, let’s say Medicare determines that Julie no longer automatically qualifies for Extra Help. Medicare (CMS) reviews data from Julie's state for a month during the current year where she doesn't qualify for Medicaid (Month 2). As a result, Medicare determines that Julie no longer automatically qualifies for Extra Help beginning January 1 of the next calendar year.
Medicare sends her a gray letter saying she doesn't automatically qualify and encourages her to apply for Extra Help through Social Security to see if she qualifies based on her income and resources. Even though she no longer automatically qualifies, Julie may still qualify for Extra Help if she applies since the Extra Help qualification limits change each year
Like this year, if Julie doesn’t qualify for Extra Help through Social Security, she’ll automatically become eligible to enroll in Extra Help if she meets her spenddown limit at least once during a calendar year.
For example, after not qualifying in January (like in the example Month 2) because she didn’t meet her spenddown limit, Julie can meet her spenddown limit in February (like in the example Month 3) and automatically qualify to enroll in Extra Help. If that happens, her state tells Medicare, and she gets a letter from Medicare saying she automatically qualifies for Extra Help beginning with the month she qualified for Medicaid (February) until at least December 31 of the same year.
For more information about Medicare prescription drug coverage…
- Visit Medicare.gov/find-a-plan to get personalized information about Medicare drug plans.
- Call 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048
- Call your State Health Insurance Assistance Program (SHIP). Visit shiptacenter.org
or call 1-800-MEDICARE for the phone number.
CMS Pub. No. 11249-P "Medicaid Spend Down" - with additions and emphasis added