Protecting Medicare’s low-income beneficiaries

Debates about Medicare’s future too often ignore two important facts about the people who rely on Medicare. First, about half of the seniors and people with disabilities who rely on Medicare have limited incomes. Second, many low-income Medicare beneficiaries are not adequately protected from out-of-pocket healthcare costs.

As Medicare changes in the coming years, we must maintain and strengthen protections for low-income people.

In 2013, about half of the people with Medicare had annual incomes below $23,500. One-quarter of beneficiaries had incomes below $14,400. Most people with Medicare have, at best, modest savings: In 2013, half had less than $61,400 in total savings, and a quarter had savings of less than $11,300.

Moreover, despite the misperception that Medicare somehow provides free healthcare, out-of-pocket costs — premiums, copayments, co-insurance, and deductibles — are, in fact, substantial. On average, people with Medicare spend 14 percent of their household budgets on healthcare costs, which is nearly three times more than non-Medicare households. People with limited incomes spend an even greater share.

Some financial assistance is available to Medicare beneficiaries who need help paying for healthcare. The lowest-income beneficiaries can turn to Medicaid for help with premiums and cost sharing. Medicaid also provides additional services, most notably long-term supports and services.

Medicare Savings Programs, a lesser-known part of the Medicaid program, also provide financial help by covering Part B premiums, and, in some cases, covering all out-of-pocket costs for people with slightly higher incomes. And the Part D low-income subsidy (often called Part D Extra Help) covers some or all of Part D premiums and copayments.

But this assistance falls short for many. Income limits are low: 135 percent of the federal poverty level, currently $15,755 per year for an individual, is the upper limit for most types of assistance (some limited help with prescription drug costs is available at slightly higher income levels). These programs also have strict asset limits, even though workers are increasingly urged to save for retirement. In most states, having more than $8,580 in total savings in 2013 disqualifies an individual from most help with Medicare costs.

We can fix this problem. The most immediate step is to make the little-known Qualified Individual (QI) program permanent as part of the legislation that fixes the Medicare sustainable growth rate. About 450,000 low-income beneficiaries with incomes between 120 percent and 135 percent of poverty ($14,000-$15,755 per year) rely on the QI program to cover their Part B premiums. The program saves each beneficiary more than $1,200 per year. Right now, the program is due to expire in March. It should be made a permanent part of federal law.

In the longer term, we must reconsider the asset limits that disqualify many low-income Medicare beneficiaries from getting help with their healthcare costs. Few low-income seniors and people with disabilities are sitting on large fortunes. But some have done the right thing and built a modest nest egg over their working lives, with the hope of using that reserve to maintain a decent standard of living in their later years. It is shortsighted public policy to force them instead to deplete their savings before they can receive assistance with their healthcare costs. Asset limits must be increased substantially — if they are retained at all.

At the administrative level, we need to better align the Medicare Savings Programs and Part D low-income subsidy so that they use common definitions of income and assets. This improvement would make eligibility determinations much simpler for states and the federal government, resulting in increased enrollment.

Ultimately, we should also re-examine the current income limits on financial assistance. In other contexts, like children’s health, 200 percent of poverty ($23,340 for an individual) is considered a proxy for limited income. Adding some protections for Medicare beneficiaries with incomes up to that level would provide them with much-needed relief from healthcare costs.

These longer-term goals will not be easy to achieve. They all have a fiscal cost and will require considerable leadership and commitment to attain. But, like the rest of our healthcare system, Medicare is in a period of change. And while much of the focus today is understandably on improving how Medicare pays for care, we cannot leave vulnerable beneficiaries behind. We must also ensure that the low-income seniors and people with disabilities who rely on Medicare can afford the care they need.

Pollack is executive director of Families USA.