Medicare Savings Programs Could Cut Your Healthcare Costs—Here’s How to Qualify
Discover how Medicare Savings Programs could reduce your medical expenses this year
With rising healthcare costs, people are looking high and low for ways to save. This includes the millions of Americans on Medicare, who are relying more and more on Medicare Savings Programs (MSPs). But what is that exactly? And how can you be sure you enroll in the correct one? We break it all down below.
What is a Medicare Savings Program?
A MSP is a payment plan that helps people with a limited income pay for Medicare plans. There are four kinds: Qualified Medicare Beneficiary (QMB), Qualifying Individual (QI), Specified Low-Income Medicare Beneficiary (SLMB) and Qualified Disabled and Working Individuals (QDWI), and you can view what each one covers and how to qualify for it below.
- QMB covers Medicare Part A and Part B premiums, deductibles and co-insurance. To qualify, one must have an annual income at or below 100 percent of the Federal Poverty Level (FPL), which is currently $15,650 for a single person.
- QI helps pay Part B premiums for people with incomes between 120 percent and 135 percent of the FPL ($18,780 to $21,127.50 a year).
- SLMB helps cover Part B premium costs for individuals with incomes between 100 percent and 120 percent of the FPL ($15,650 to $18,780 a year).
- QDWI is for people under the age of 64 who returned to work and lost their premium-free Part A coverage.
How to pick a Medicare Savings Program
To figure which program is the best for you, Jared Kessler, founder of ForexBroker.tips, a website dedicated to helping people understand their finances, says your best step is to “Determine the appropriate program based on your state’s income and/or asset limit(s) and the specific program you are eligible for, as both are established at the state level, and program types may be different from one another.”
To figure out which plan you qualify for, he suggests contacting your state Medicaid office. “Also, it is very helpful to evaluate every source of income, not simply the amount of Social Security being received,” he adds. “Pensions and even small annual retirement distributions may impact an individual’s eligibility; therefore, this is something to evaluate annually.”
Are there any hidden fees in a Medicare Savings Program?
Kessler assures that MSP itself won’t incur taxes. “Since the MSP benefits pay for your Medicare costs and, therefore, you have no ‘cash’ benefit, this is considered nontaxable income.”
“However, the income that was used to determine your eligibility for an MSP may still incur tax liabilities. For instance, if you withdraw money from a retirement account to lower your income and qualify for an MSP, you will likely see a tax impact on that withdrawal, but not on your MSP benefit itself,” he continues.
How to enroll in a Medicare Savings Program
After choosing a program, you can enroll at your local Medicaid office. Be aware though, Kessler says, “Many elderly individuals have a difficult time getting enrolled in programs, as the process is voluntary—it does not automatically occur even when all qualification requirements are met; therefore, many who would be eligible do not enroll because they did not apply and/or assume they were not eligible.”
“Also, an elderly individual’s eligibility for benefits can vary from year to year. If a small increase in an elderly person’s annual income or assets occurs, their benefit will stop, which is another reason for ongoing monitoring of an elderly individual’s situation,” he explains.
Kessler also notes that applications for MSPs can take several weeks and even months. For that reason, he recommends applying as soon as possible.
“A number of individuals will be amazed at the amount of money they may save every year, particularly due to their Part B premiums being paid for,” says Kessler. “These monthly savings can greatly assist in providing cash flow for retirement expenses.”
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