What a Medicare Savings Program Pays For

Answer first: four programs, four income bands, four different things paid

These are Medicaid eligibility categories, created by federal regulation and administered by states. The medicare.gov page states the administration point in one line: "These programs are run by your state," and directs applicants to contact their state.

The federal regulations define each category by the same structure — a Medicare entitlement condition, an income band expressed as a percentage of the federal poverty level, a resource test, and a scope of what the state must pay.

Qualified Medicare Beneficiary is the broadest in scope: income not exceeding 100 percent of the federal poverty level, and coverage of "Parts A and B premiums and cost sharing, including deductibles and coinsurance, and copays."

Specified Low-Income Medicare Beneficiary picks up where that ends: the same eligibility requirements "except that income exceeds 100 percent, but is less than 120 percent of the poverty level," with coverage of the Part B premium. Qualifying Individual takes the next band, income "at least 120 percent, but less than 135 percent" of the federal poverty level, also covering the Part B premium.

Qualified Disabled and Working Individual is structurally different. It applies to individuals entitled to Part A under the working-disabled enrollment provision, with income less than or equal to 200 percent of the federal poverty level and resources not exceeding twice the SSI resource standard, and its scope is "coverage of the Part A premium."

How the income and resource tests are written

The Qualified Medicare Beneficiary regulation is the template the other two premium programs borrow. It requires the individual to be entitled to Medicare Part A under the stated eligibility provisions, or to be enrolled in Part B for coverage of immunosuppressive drugs, and to have income not exceeding 100 percent of the federal poverty level.

There is a cost-of-living adjustment protection inside the income test. During a "transition month," any income attributable to a cost of living adjustment in Social Security retirement, survivors or disability benefits does not count. The regulation defines a transition month as any month of the year beginning when the adjustment takes effect, through the month following the month in which the revised official poverty level is published. That provision exists because benefit increases arrive before the poverty guidelines are updated, and without it people would drop out of eligibility every January and return weeks later.

The resource test is expressed as a multiple rather than a number. Resources are determined "using financial methodologies no more restrictive than SSI" and must not exceed three times the maximum resource level allowed under the SSI program, annually adjusted for inflation by the Consumer Price Index as the statute provides.

The statute behind the category adds detail the regulation compresses. It defines a qualified medicare beneficiary by Part A entitlement, an income level established by the State consistent with the statutory schedule, and a resource level tied either to twice the SSI maximum or, effective from January 2010, to the low-income subsidy resource level for the year. The statutory income schedule stepped up over time — 85 percent from 1989, 90 percent from 1990, and 100 percent from 1991 — with a separate, slower schedule for a State that had elected a more restrictive income standard as of January 1987.

'Medicare cost-sharing' is a defined term, and it is broader than it sounds

For a Qualified Medicare Beneficiary, the statute defines what the state pays. Medicare cost-sharing means costs incurred with respect to a qualified medicare beneficiary "without regard to whether the costs incurred were for items and services for which medical assistance is otherwise available under the plan" — a phrase that decouples the payment from the state's own Medicaid benefit package.

The list has four components. Premiums under the two Part A enrollment provisions and premiums under the Part B premium section. Coinsurance under Medicare, including the coinsurance provisions the statute cites. Deductibles established under Medicare, including those in the cited sections. And the difference between the amount paid under the Part B payment provision and the amount that would be paid if the reference to "80 percent" in that provision were read as "100 percent."

That fourth item is the one worth reading twice. It is the mechanism by which the ordinary twenty percent Part B coinsurance becomes a state obligation rather than a patient obligation. The statute also permits a state, at its option, to include premiums for enrollment with an eligible organization under the cited managed care provision.

The regulation adds a limit for people whose Part B enrollment is only for immunosuppressive drug coverage: for them, the state covers only premiums and cost sharing related to that enrollment. The same limitation appears in the Specified Low-Income Medicare Beneficiary and Qualifying Individual regulations, each restricted to the Part B premium related to that enrollment.

The mechanism by which a state actually pays the premium

The premium collection regulation names the four methods by which Medicare premiums can be paid: payment by a State under a buy-in agreement; deduction from monthly railroad retirement or Social Security cash benefits or a federal civil service annuity; direct remittance by or on behalf of the enrollee; and direct remittance on a group basis by an employer, union, lodge, other organization or a State or local government entity.

A buy-in agreement is defined as "an agreement under which a State, through enrollment and payment of SMI premiums, secures SMI benefits for individuals who are eligible for that program and also eligible for certain other cash or medical benefits." The State pays the premiums for each month an individual is covered under the agreement.

The priority rules matter to anyone reading a benefit statement. If an enrollee is enrolled under a State buy-in agreement, premiums "may not be deducted from monthly cash benefits or annuities" and the enrollee "may not be required to pay by direct remittance." That is why the deduction disappears from a Social Security payment when a Medicare Savings Program takes effect.

The regulation also handles the reverse. If an individual's coverage under a State buy-in agreement terminates, coverage continues on an individual enrollment basis, and premiums are then deducted from benefits or paid by direct remittance under the ordinary rules.

The consequence most people are not told about

Eligibility for one of these programs carries a second benefit that is granted automatically. The Part D low-income subsidy regulation states that an individual must be treated as meeting the eligibility requirements for full subsidy eligible individuals if the individual is "eligible for Medicaid as a Qualified Medicare Beneficiary (QMB), Specified Low Income Medicare Beneficiary (SLMB), or a Qualifying Individual (QI) under a State's plan."

CMS must notify such an individual that they do not need to apply for the subsidy. The deeming runs for the remainder of the calendar year for someone deemed eligible between January 1 and June 30, and for the remainder of that year plus the following calendar year for someone deemed eligible between July 1 and December 31.

The medicare.gov page describing Extra Help lists the same route among the ways a person receives it automatically: "Help from your state paying your Part B premiums (from a Medicare Savings Program)." One application, made to a state, can produce two federal results.

Note that the Qualified Disabled and Working Individual category is absent from that deeming list in the low-income subsidy regulation. Its scope is limited to the Part A premium, and it sits outside the three categories the subsidy rule names.

Whether any individual meets an income band, a resource test or a Medicare entitlement condition is determined by the state Medicaid agency on that individual's record. The regulations describe what a state must provide to a person who meets the definition; they do not predict who does.