Not everyone can afford a ferrari. I sure can’t! If you are one of the many people having a hard time making ends meet, you can turn to the federal government for help. Medicare Savings Programs can pay down your Part A and/or Part B expenses and the Extra Help Low Income Subsidy can cut costs for Part D. To qualify for these programs, your income and assets need to be at or below a certain level.

What Counts as Income

Sources of income counted for these programs include everything counted for Medicaid eligibility. This means there can be some variation from state to state. Be sure to reach out to your local Medicaid office for details.

Not all of your income counts toward your eligibility for these programs. The first $20 of your monthly income and the first $65 of your monthly wages don’t count. After you take away the first $65, these programs only consider half of your monthly wages.

COUNTS: Generally, countable income includes capital gains, farm income, federal taxable income, investment income, self-employment income, Social Security Disability Insurance (SSDI), rental income, royalty income, tips, unemployment compensation, and untaxed foreign income. Alimony may count too but only for divorces finalized before January 1, 2019.

DOES NOT COUNT: Child support, gifts/inheritance, Supplemental Security Income (SSI), Veteran’s disability benefits, and workers compensation do not count. Income you receive from public assistance programs generally does not count either. This includes support you receive through Child Tax Credits, Supplemental Nutrition Assistance Program (SNAP), i.e., food stamps, or Temporary Assistance for Needy Families (TANF). Also, any money you contribute toward a 401K or IRA doesn’t count.

What Counts as an Asset

When it comes to your application, not everything you own will count as an asset. Your primary residence will not count nor will your primary vehicle.

COUNTS: Mainly, these programs will want to know what you have in any bank accounts (checking and/or savings accounts) and about any stocks or bonds you have. Any cash you have on hand counts too.

THE GREY ZONE: If you have additional real estate or a second vehicle, that could count too — unless you rely on that property to support your income. Think about farmland and rental income as examples. In those cases, you would need to look at the equity of that property (the difference between what you owe and what the property is worth). The law allows $6,000 of that equity to be exempt from your countable assets. Keep if mind this rule only applies if the property generates at least 6% of its equity value that year.

DOES NOT COUNT: These programs will not count any burial plots, engagement/wedding rings, furniture, household items, life insurance policies less than $1,500 cash value, or up to $1,500 specifically put aside for burial expenses.

What About a 401K or an IRA?

Retirement accounts and pensions can be hit or miss when it comes to your eligibility. They could count as assets, income, or both. It all depends where you live and whether or not your accounts are in pay-out status.

COUNTS: If you receive payouts from your 401K, IRA, or pension, the amount you take out counts as income. You have to start taking pay-outs from a 401K or traditional IRA by 72 years old (if your 70th birthday was before July 1, 2019), but you can delay pay-outs from a Roth IRA. They are not required until the owner has passed away.

GREY ZONE: In some states, your 401K and IRA are not counted as assets so long as they are in pay-out status. As of 2022, these states include California, Florida, Georgia, Idaho, Mississippi, New York, Ohio, Rhode Island, South Carolina, and Vermont. You can also add D.C. to the mix. If your retirement plans are not in pay-out status or they are in other states, they will count toward your assets.

DOES NOT COUNT: In some states, your 401K and IRA are not counted as assets EVER. Payout status doesn’t matter. As of 2022, that is only the case in Kentucky and North Dakota.

 

20 CFR § 416.1222 – How income-producing property essential to self-support is counted. (2022). LII / Legal Information Institute. https://www.law.cornell.edu/cfr/text/20/416.1222

401k Plans | Internal Revenue Service. (2023). IRS.gov. https://www.irs.gov/retirement-plans/401k-plans

How IRAs, Pensions & 401Ks Impact Medicaid Eligibility | American Council on Aging. (2022). Medicaidplanningassistance.org. https://www.medicaidplanningassistance.org/medicaid-eligibility-401k-ira/

Income Definitions for Marketplace and Medicaid Coverage – Beyond the Basics. (2020). Center on Budget and Policy Priorities. https://www.healthreformbeyondthebasics.org/key-facts-income-definitions-for-marketplace-and-medicaid-coverage/

Individual Retirement Arrangements (IRAs) | Internal Revenue Service. (2022). IRS.gov. https://www.irs.gov/retirement-plans/individual-retirement-arrangements-iras