Medicare & Medicare Savings Programs

Overview

This tool looks at how the Medicare health insurance program works for SSDI beneficiaries. It discusses eligibility and costs. It describes the four parts of Medicare. It also discusses options to make Medicare more affordable, including Medicare Savings Programs.

About Medicare

Medicare is a federal health insurance program. It is run by the Centers for Medicare & Medicaid Services (CMS). Medicare Part C plans are offered by private insurance companies that contract with Medicare.

Who Uses Medicare?

More than 75 million people use Medicare. SSDI beneficiaries are eligible for Medicare, but Medicare is also available to:

• People who are age 65 or older
• Anyone with amyotrophic lateral sclerosis (ALS) (also known as Lou Gehrig’s disease) or end-stage renal disease (ESRD)
• Certain Medicare-qualified federal employees

The 24-Month Waiting Period for SSDI Beneficiaries

SSDI beneficiaries are eligible for Medicare automatically, but usually not right away. They usually must wait 2 years after their SSDI payments start. This is called the 24-month waiting period. (Individuals with ALS or ESRD qualify for Medicare without a 24-month waiting period.)

Remember that SSDI payments start 5 months after the disability onset date. The Medicare waiting period is always 24 months after the first month of SSDI payment eligibility. Because appeals can take many months, some beneficiaries are eligible for Medicare soon after they win their appeal.

The Four Parts of Medicare

Medicare has four parts: A, B, C, and D. Medicare-eligible SSDI beneficiaries qualify for Medicare Part A automatically, with options to enroll in Parts B and D.

Medicare Part A: Hospital Insurance

Part A is automatic upon eligibility for Medicare. SSDI beneficiaries do not pay a premium for Part A, but they may incur deductibles and copayments. Part A covers, for example, inpatient hospital care, limited skilled nursing facility care, home health services following hospitalization, and hospice care.

Medicare Part B: Supplemental Medical Insurance

Although Part B is optional, SSDI beneficiaries get Part B automatically when they become Medicare-eligible. A beneficiary can, however, opt out of Part B. Beneficiaries must pay a Part B monthly premium ($174.70 if newly enrolled in 2024). Most beneficiaries agree to have the Part B premium taken out of their monthly SSDI payment.

Part B covers, for example, doctor visits, mental health care, vaccinations, durable medical equipment (DME), prosthetic and orthotic devices, and home health services. After the annual deductible, Part B covers 80% of the reasonable cost of an item, with the beneficiary paying for the remaining 20%.

State Medicaid programs may pay the Part B premiums and other Part B costs for some beneficiaries with limited income through Medicare Savings Programs (MSPs). These programs include Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare Beneficiary (SLMB), and Qualified Individual (QI). For more detail on MSPs, see below.

Medicare Part C: Medicare Advantage Plans

Part C provides Medicare-covered services through a private insurance company operating as a managed care organization. If a Medicare Advantage Plan is active in the beneficiary’s area, they can enroll in it. About 40% of beneficiaries are enrolled in a Medicare Advantage Plan.

Medicare Advantage Plans cost more than traditional Medicare, but typically offer a broader range of services. For example, hearing aids, which are not covered by traditional Medicare, may be available through a Medicare Advantage Plan. Some Medicare Advantage Plans provide Parts A and B only, while others also include Part D.

Medicare Part D: Prescription Drug Benefit

Part D is administered through various private health insurance plans. When an individual is eligible for both Medicare and Medicaid and would qualify for Part D benefits, they are not eligible for Medicaid prescription drug coverage. Part D has monthly premiums, copayments, and deductibles. These costs can be avoided, to a greater or lesser degree, if the individual is eligible for either full or partial Extra Help, also known as the Part D Low-Income Subsidy (LIS) program.

Late Enrollment Penalties with Optional Parts B and D

Although Parts B and D are optional, SSDI beneficiaries could face late enrollment penalties if they do not enroll at the earliest opportunity:

• The Part B late enrollment penalty is a 1% premium increase for each month of delay (the maximum penalty for a full calendar year is capped at 10%). An exception is if the beneficiary works and has health insurance through an employer (or through a spouse’s employer). In this case, it is fine to delay enrollment until that coverage ends. After that, the beneficiary should enroll promptly.
• The Part D late enrollment penalty is a small premium increase for each month of delay. (The specific increase is 1% of the national base beneficiary premium, which isn’t necessarily the cost of a particular person’s premium.) An exception is if the beneficiary has prescription drug coverage through another source of “creditable coverage.” If this coverage ends, the beneficiary will want to enroll promptly.

These penalties apply until the person reaches the Medicare retirement age, which is currently age 65. Enrollment in a Medicare Savings Program (MSP) can eliminate late enrollment premium penalties.

Medicare and Work

Many SSDI beneficiaries work but never lose SSDI benefits because they never earn at the Substantial Gainful Activity (SGA) level. In those cases, Medicare always continues as long as their SSDI payments continue. Beneficiaries with countable earnings above the SGA level will eventually experience a suspension and later a termination of SSDI benefits. Those individuals will benefit from the Extended Period of Medicare Coverage (EPMC).

Note that the EPMC, like the SSDI work incentives discussed in Tool 4, is available only if the beneficiary continues to be medically disabled.

The EPMC Allows Medicare to Continue for at Least 93 Months after the Trial Work Period

As explained in Tool 3, the Trial Work Period (TWP) is followed by a 36-month Extended Period of Eligibility (EPE). If the beneficiary earns at the SGA level during the EPE, their SSDI payments are suspended after the Grace Period, and they face a termination of SSDI if they have countable earnings over the SGA level after the EPE ends.

Despite a termination of SSDI for SGA-level earnings, after the EPE, the EPMC allows Medicare to continue for at least 93 months after the TWP.

Dual Eligibility for Medicaid and Medicare

Some beneficiaries are eligible for Medicaid and Medicare. For these dually eligible beneficiaries, Medicare is the first payer for services that are potentially covered by both programs, with Medicaid available to pay any uncovered expenses.

Often, Medicaid will cover services that traditional Medicare does not cover, including long-term care in nursing homes, dental care, and vision care. Part C plans do not make financial sense for many beneficiaries who are dually eligible for Medicare and Medicaid.

Types of Medicare Savings Programs (MSPs)

Medicare Savings Programs (MSPs) are administered by the Medicaid program in each state and are governed by federal law with some state options. These programs are:

• Qualified Medicare Beneficiary (QMB): This program pays Part B premiums, and Parts A and B deductibles and copayments for eligible beneficiaries.
• Specified Low-Income Beneficiary (SLMB): This program pays Part B premiums for eligible beneficiaries.
• Qualified Individual (QI): This program pays Part B premiums for eligible individuals.
• Qualified Disabled and Working Individual (QDWI): This program pays Part A premiums for eligible individuals who have exhausted their EPMC and are no longer eligible for premium-free Part A. We don’t provide details on this program because by the time their EPMC ends, most beneficiaries have health care coverage through employer provided health insurance, Affordable Care Act Marketplace, or a state Medicaid Buy-In program.

To understand the MSP offerings in your state, it may help to know that some states refer to these programs by other names. Also, some states offer each MSP separately, but a few states combine some of the categories. For example, New York doesn’t offer SLMB, but it includes SLMB financial limits in its QMB program.

Qualified Medicare Beneficiary (QMB) Program

If an SSDI beneficiary is eligible for QMB, the state’s Medicaid agency will pay the Part B premium, and the Parts A and B deductibles and coinsurance.

To be eligible for QMB in 2024, a beneficiary must have all the following:

• Medicare Part A.
• Countable income below $1,275 per month for an individual, $1,724 for a couple (or higher limits set by the state).
• Countable resources below $9,430 for an individual, $14,130 for a couple (or a higher limit set by the state).

The same resource limit applies to QMB, SLMB, and QI. States can set higher income or resource limits but cannot set lower limits. Check your state’s Medicaid regulations or manual for details about your state’s income and resource limits.

Specified Low-Income Beneficiary (SLMB) Program

If an SSDI beneficiary is eligible for SLMB, the state’s Medicaid agency will pay the Part B premium but will not cover the deductibles and copayments for Parts A and B.

To be eligible for SLMB in 2024, a beneficiary must have:

• Medicare Part A.
• Countable income below $1,526 per month for an individual, $2,064 for a couple (or a higher limit set by the state).
• Countable resources below $9,430 for an individual, $14,130 for a couple (or a higher limit set by the state).

Qualified Individual (Q1) Program

If an SSDI beneficiary is eligible for QI, the state’s Medicaid agency will pay the Part B premium but will not cover Part B costs for deductibles and copayments.

To be eligible for QI in 2024, a beneficiary must have:

• Medicare Part A.
• Countable income below $1,715 per month for an individual, $2,320 for a couple (or a higher limit set by the state).
• Countable resources below $9,430 for an individual, $14,130 for a couple (or a higher limit set by the state).

An individual cannot qualify for both Medicaid and QI at the same time.

Beware of Websites with Poor Information about MSP Eligibility and Work Incentives

Many government and provider websites approach MSP eligibility on the assumption that Medicare beneficiaries do not work. Also, even if they do consider work, they may not accurately describe how SSI work incentives apply to MSP eligibility.

For example, a site may state that the only income exclusion is the $20 General Income Exclusion, even though MSP applicants may use all SSI work incentives. (For more about these incentives, see the SSI at Work Toolkit, Tool 4.)

These incentives can be essential to the eligibility of a working Medicare beneficiary, so check your online information carefully!

MSPs Eliminate the Part B Late Enrollment Penalty

Generally, if a beneficiary does not enroll in Medicare Part B at their first opportunity, they face a 1% penalty for each month they delay enrollment (with a 10% annual penalty cap).

An exception is if the beneficiary was covered by their employer’s health insurance plan or by the health insurance plan of their spouse’s employer during the period in question. In that case, the entire late enrollment penalty disappears.

Another exception is when a beneficiary enrolls in an MSP. When this happens, the beneficiary’s entire late enrollment penalty disappears.

MSP Enrollment Guarantees Medicare Part D Extra Help

The Medicare Part D prescription drug program can create significant out-of-pocket expenses, such as monthly premiums, prescription copayments, and a non-coverage period called the donut hole. Many of those costs can be paid for by the Part D Extra Help program, also known as the Low-Income Subsidy (LIS).

There are two ways to qualify for Extra Help: The first way is by meeting one of two sets of income and asset tests. The second way to qualify is by being dually eligible for Medicare and Medicaid. Anyone who is dually eligible is automatically enrolled in Part D Extra Help. Since an MSP is considered a form of Medicaid, an MSP beneficiary is considered “dually eligible” and automatically qualifies for Extra Help. This is the case even if the beneficiary does not qualify for Medicaid itself and would not meet the usual income and resource criteria for Extra Help.