If you’re like most seniors, healthcare costs are probably the third-highest expenditure in your budget – just behind other necessities like housing and transportation. People over the age of 65 can expect to pay more than $8,000 a year in healthcare costs. If you live on a fixed income, especially if you have multiple chronic conditions, an unexpected hospital bill of $1,000 can be a huge hit to your budget. Even monthly premiums and $25 copays add up quickly.

But there may be a solution. Medicare Savings Programs (MSPs) are available to help defray some of those expenses for seniors with lower incomes. MSPs, also known as Medicare Buy-In Programs or Medicare Premium Payment Programs, are sponsored by state Medicaid offices and provide financial assistance for Part A and Part B premiums, Part B out-of-pocket costs, and drug costs for qualifying individuals. Read on to find out more about these programs and who qualifies.

How to qualify for Medicare Savings Programs

Medicare Savings Programs are benefits designed to make Medicare premiums and prescription drug costs more affordable for people on a fixed income. The Centers for Medicare & Medicaid Services (CMS) set income and asset limits for each of its four MSPs. Even if you think you may earn too much to qualify for MSPs, you should still apply. Not all your income and assets are counted – each state has different guidelines for what is, and isn’t, included.

For income, all states must exclude:

• The first $20 of unearned income (like Social Security benefits),
• The first $65 of monthly wages earned from work,
• Half of your monthly wages,
• Food stamp benefits.

For assets, the state will count money you have in your checking, savings, and retirement accounts. They will also include stocks and bonds. Though states can have different asset requirements, all states must exclude:

• Your primary home,
• One car,
• Burial plots,
• Household items and wedding/engagement rings,
• Up to $1,500 in burial expenses,
• Life insurance with a cash value of up to $1,500.

Most states have the same guidelines for assets and income. But some (like Alaska, Maine, and Hawaii) have higher income limits and others (including Vermont, New York, and Washington, D.C.) waive the asset guidelines. Check with your state to find out their individual policy. The general income and asset limits for the four programs are:

How do these programs interact with Extra Help?

Extra Help, also known as the Medicare Part D Low-Income Subsidy, is a program that reduces your prescription drug costs. With Extra Help, you pay no premium, no deductible, and no more than $5.10 for generic drugs and $12.65 for brand-name medications. If you’re eligible for a QMB, SLMB, or QI program, you automatically qualify for Extra Help.

Step-by-step: How to apply

You’ll apply for MSPs through your state’s Medicaid program. Each state is different, so you’ll need to check with the program to see how you can apply. Typically, you can either apply online, through the Medicaid portal, or print off a form and upload it, fax, or mail it to the Medicaid offices.

Documents you’ll need to have on hand when you apply include:

• Proof of income,
• Proof of assets,
• Your Medicare card,
• Proof of address.

The Four Tiers of Medicare Savings Programs

There are four different Medicare Savings Programs available to low-income Medicare beneficiaries.

Qualified Medicare Beneficiary (QMB) Program: Pays toward Part A and Part B premiums and Part B out-of-pocket costs like deductibles, coinsurance, and copayments for Medicare-covered services.

Specified Low-Income Medicare Beneficiary (SLMB) Program: Provides financial assistance for Part B premiums.

Qualifying Individual (QI) Program: Helps pay for Part B premiums.

Qualified Disabled & Working Individual (QDWI) Program: Provides funding for Part A premiums if you have a disability, are working, and lost your Social Security disability and Medicare free premium benefit because of your income.

Having Medicare coverage goes a long way toward reducing healthcare spending. But if you live on a fixed income, the monthly premiums and drug costs can be steep, especially if you have one or more chronic conditions. Medicare Savings Programs relieve some of that financial burden by covering premiums and other out-of-pocket medical and drug costs. If you want to find out if you qualify for MSPs, reach out to your state Medicaid office for more information on the programs.