Why Medicare Costs Can Add Up — and What the Safety Net Offers
Original Medicare covers a substantial share of healthcare expenses, but it does not cover everything. Premiums, deductibles, copayments, and coverage gaps — particularly for prescription drugs — can impose a real financial burden on seniors living on fixed incomes. Fortunately, several federal and state programs exist specifically to reduce or eliminate these costs for people who qualify.
This article explains the most significant low-income subsidy programs available to Medicare beneficiaries. Understanding how each one works is the first step toward claiming benefits you may already be entitled to. Because Medicare and Medicaid interact closely in this area, it helps to be familiar with the distinction between them — see our overview of Medicare vs. Medicaid for a clear breakdown of each program's scope.
This article provides general educational information only and is not personalized financial, legal, or benefits advice. Eligibility rules, income limits, and program details can change. Always verify current requirements with the relevant agency or a qualified benefits counselor before making enrollment decisions.
Extra Help (Low-Income Subsidy for Part D)
Extra Help — also called the Low-Income Subsidy (LIS) — is a federal program administered by the Social Security Administration (SSA) that helps pay Medicare Part D prescription drug costs. Qualifying individuals can receive assistance with plan premiums, annual deductibles, and copayments for covered drugs.
Eligibility is based on income and resources. The SSA publishes updated thresholds each year; generally, single individuals and married couples with limited income and assets may qualify. People who receive full Medicaid benefits or Supplemental Security Income (SSI) are typically enrolled in Extra Help automatically.
To apply, contact the SSA directly, either online at ssa.gov, by phone, or in person at a local SSA office. Your State Health Insurance Assistance Program (SHIP) can also provide free, unbiased guidance.
Extra Help can reduce Part D drug costs to a few dollars per prescription for eligible beneficiaries.
Medicare Savings Programs (MSPs)
Medicare Savings Programs are state-run programs funded jointly by states and the federal government. Depending on which of the four MSP levels a person qualifies for — Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), Qualifying Individual (QI), or Qualified Disabled and Working Individual (QDWI) — the program may pay some or all of the following: Part A and Part B premiums, deductibles, coinsurance, and copayments.
The QMB program, for instance, covers Part A and Part B premiums as well as cost-sharing, providing meaningful relief for those with very low incomes. Income and resource limits vary by state and are adjusted annually. Applications are submitted through your state Medicaid agency.
Enrolling in an MSP can also trigger automatic Extra Help enrollment for Part D, so one application may open access to multiple programs.
Some MSP enrollees pay nothing out of pocket for Medicare-covered services — premiums, deductibles, and copays included.
Medicaid for Dual-Eligible Beneficiaries
Individuals who qualify for both Medicare and Medicaid are known as "dual eligibles." For this group, Medicaid can fill many of the gaps that Medicare leaves open, including long-term services and supports, dental care, vision, and hearing benefits, depending on the state's Medicaid plan.
Dual eligibility is determined separately for each program. Medicare eligibility is based primarily on age or disability work history, while Medicaid eligibility is income- and asset-based and administered at the state level. Because Medicaid rules differ significantly across states, seniors should contact their state Medicaid office to understand exactly what benefits apply in their situation.
Coordinating both programs correctly can be complex. A SHIP counselor or a licensed benefits specialist can help navigate the interaction between Medicare and Medicaid coverage.
Dual-eligible beneficiaries may have most healthcare costs covered between Medicare and Medicaid combined.
Program of All-Inclusive Care for the Elderly (PACE)
PACE is a unique, federally approved care model designed for adults aged 55 or older who need nursing-home-level care but prefer to remain in the community. It provides a comprehensive package of medical, social, and long-term care services through a team-based approach, typically centered at an adult day health center.
Participants in PACE must be enrolled in both Medicare and Medicaid, or be able to pay privately for the Medicaid portion of costs. PACE organizations receive a fixed monthly payment from Medicare and Medicaid and in turn cover all medically necessary services, often at little or no direct cost to participants.
PACE is not available in every state or locality. The Medicare Plan Finder at medicare.gov can help you determine whether a PACE organization operates in your area.
PACE integrates all needed healthcare and supportive services into one coordinated plan, often eliminating separate copays.
State Pharmaceutical Assistance Programs (SPAPs)
Beyond federal programs, many states operate their own State Pharmaceutical Assistance Programs to help residents afford prescription drugs. SPAPs typically wrap around Medicare Part D, covering costs that Extra Help or the Part D plan itself does not pay — such as premiums or cost-sharing for drugs not on a plan's formulary.
Each state designs its own SPAP independently, so eligibility criteria, covered drugs, and benefit amounts vary considerably. Some states limit SPAPs to specific conditions or age groups, while others have broader income-based criteria.
The National Council on Aging (NCOA) and your state's SHIP are good starting points for identifying whether your state offers an SPAP and what you would need to qualify. Do not assume your state does not have a program without checking — eligibility rules change, and new programs are periodically introduced.
State pharmacy assistance programs can close gaps that federal Extra Help leaves open, especially for high-cost specialty drugs.
Medicare Part B Income-Related Monthly Adjustment Amount (IRMAA) Appeals
Higher-income Medicare beneficiaries pay more for Part B (and Part D) through surcharges known as the Income-Related Monthly Adjustment Amount, or IRMAA. While IRMAA affects those with higher incomes rather than those with lower ones, it is relevant for seniors whose income has recently dropped — for example, following retirement, the death of a spouse, or a significant change in investments.
The SSA determines IRMAA based on your tax return from two years prior. If your income has since decreased significantly, you may be able to file a Life-Changing Event appeal using SSA Form SSA-44 to request a lower surcharge based on your current income. This is not a low-income subsidy in the traditional sense, but it is an important cost-reduction mechanism that many Medicare beneficiaries overlook.
Consult a qualified tax or benefits professional to determine whether an appeal is appropriate for your situation.
A recent income reduction may qualify you to appeal your IRMAA surcharge and lower your Part B premium immediately.
Taking the Next Step Toward Lower Costs
Applying for these programs does not have to be complicated, but it does require attention to detail. Income and asset documentation, state-specific rules, and annual re-enrollment deadlines all matter. A good practice is to review your benefit eligibility each year — our annual benefits review checklist can help you track deadlines and spot changes that affect eligibility.
For a broader picture of what public programs are available to older adults beyond Medicare cost-sharing assistance, the Federal and State Benefits Programs reference guide provides a useful starting point. If housing costs are also a concern alongside healthcare, explore the housing assistance programs available to low-income seniors for additional options.
Start With a Free SHIP Counselor
Every state has a State Health Insurance Assistance Program (SHIP) that provides free, one-on-one benefits counseling. SHIP counselors are trained to help you identify which low-income subsidy programs you may qualify for and can assist with applications. To find your local SHIP, visit shiphelp.org or call 1-800-MEDICARE.
