Medicare Extra Help: How the Low-Income Subsidy Reduces Drug Costs

Medicare Extra Help — also called the Low-Income Subsidy (LIS) — is a federal program that helps Medicare beneficiaries with limited income and resources pay for prescription drug costs under Part D. If your parent qualifies, Extra Help can save them thousands of dollars per year on medications by covering most or all of the Part D premium, deductible, and copayments.

Despite being one of the most valuable programs in all of Medicare, Extra Help is significantly underutilized. Millions of eligible seniors don't apply because they don't know it exists, assume they don't qualify, or find the application process confusing. If your parent is on a fixed income and takes multiple prescriptions, this program is worth investigating.

What Extra Help covers

Extra Help pays for some or all of:

• Part D monthly premium — Extra Help covers the premium for plans at or below a benchmark amount in your parent's area. If they choose a plan above the benchmark, they pay the difference.
• Part D annual deductible — fully or partially eliminated depending on the level of Extra Help
• Prescription copayments — reduced to a few dollars per prescription. In 2026, Extra Help beneficiaries pay no more than $5.10 for generic drugs and $12.65 for brand-name drugs. Beneficiaries with full Medicaid and income below the poverty level pay at most $1.60/$4.90, and those in nursing homes or receiving home- and community-based services pay $0.
• Catastrophic-phase costs — Extra Help beneficiaries pay $0 once they reach the annual out-of-pocket cap, and the old "donut hole" coverage gap no longer exists for anyone: the Inflation Reduction Act eliminated it in 2025

For a parent taking several brand-name medications, the savings can be dramatic. Without Extra Help, Part D out-of-pocket costs can reach $2,100 per year in 2026 (the cap under the Inflation Reduction Act, up from $2,000 in 2025). With full Extra Help, those costs may be $50-$150 per year total.

Who qualifies

Eligibility is based on income and resources (assets). Since January 1, 2024, there is only one level of Extra Help — the Inflation Reduction Act eliminated the old "partial subsidy" tier, so everyone who qualifies now receives the full benefit. The 2026 thresholds:

• Income: Below 150% of the federal poverty level — about $23,940/year ($1,995/month) for an individual or $32,460/year ($2,705/month) for a married couple living together
• Resources: Below $16,590 for an individual or $33,100 for a couple — or $18,090/$36,100 if some savings are set aside for burial expenses (tell Social Security this on the application; it raises the limit by $1,500 per person)

These figures are adjusted annually; the resource limits come from CMS's yearly LIS memo and the income limits track the federal poverty level published each January.

What counts as "resources"

Resources include:

• Savings accounts and checking accounts
• Stocks, bonds, and mutual funds
• Real estate (other than the primary home)
• Cash value of life insurance policies

Resources that do NOT count:

• The home your parent lives in
• One car
• Personal possessions (furniture, clothing, etc.)
• Burial plots
• Up to $1,500 in burial funds per person
• Back payments from Social Security or SSI

The resource test catches some families by surprise. A parent who lives frugally on Social Security but has $25,000 in a savings account may exceed the resource limit, even though their actual spending power is modest. On the other hand, a parent with very little savings but a paid-off home can qualify.

Automatic qualification

Some people automatically qualify for Extra Help without applying:

• Medicaid recipients (any Medicaid coverage, including partial)
• Supplemental Security Income (SSI) recipients
• Medicare Savings Program (MSP) participants — those receiving help with Part B premiums through Medicaid

If your parent is in any of these programs, they should already be receiving Extra Help. If they're not, contact Social Security to verify.

How to apply

Online

Apply at ssa.gov/extrahelp — the Social Security Administration's online application. It takes about 10-15 minutes to complete. You'll need your parent's:

• Social Security number
• Date of birth
• Income information (Social Security benefits, pensions, wages, interest)
• Resource information (bank accounts, investments, other assets)
• Monthly spending on food and shelter (rent/mortgage, property taxes, utilities)

By phone

Call Social Security at 1-800-772-1213 (TTY: 1-800-325-0778) to apply over the phone or request a paper application.

In person

Visit a local Social Security office with your parent. Bring financial documentation — bank statements, investment account statements, pension/income records, and housing expense information.

By mail

Request Form SSA-1020 (Application for Extra Help with Medicare Prescription Drug Plan Costs) and mail it to your local Social Security office.

When to apply

Your parent can apply at any time during the year — there's no enrollment period or deadline for Extra Help. If approved, the benefit typically begins the month after the application is processed.

If your parent is newly eligible for Medicare, apply for Extra Help at the same time as enrolling in Medicare and Part D. Being approved for Extra Help also qualifies your parent for a Special Enrollment Period to switch Part D plans at any time — they're not locked into one plan for the year.

What happens after approval

If your parent is approved for Extra Help:

1. They're assigned to a Part D plan if they don't already have one. Medicare will auto-enroll them in a benchmark plan in their area.
2. They can switch plans at any time during the year. Extra Help recipients aren't restricted to the Annual Enrollment Period — they have a continuous Special Enrollment Period.
3. They should still compare plans using the Medicare Plan Finder. Auto-enrollment doesn't guarantee the best plan for their specific medications. The benchmark plan may not cover all their drugs at the lowest cost.
4. Coverage takes effect the month after approval (or the month after Part D enrollment starts, whichever is later).

If they're denied

If your parent's application is denied, they'll receive a notice explaining why. Common reasons:

• Income slightly above the threshold — even $100 over the limit results in denial
• Resources above the threshold — savings or investments pushed them over
• Incomplete application — missing documentation

Your parent can:

• Appeal the decision by requesting a reconsideration within 60 days
• Re-apply if their financial situation changes (reduced income, spent down resources)
• Apply for a Medicare Savings Program through their state Medicaid office — if approved for an MSP, they automatically qualify for Extra Help

Even if your parent doesn't qualify for federal Extra Help, some states have additional pharmaceutical assistance programs that can help reduce drug costs. Your State Health Insurance Assistance Program (SHIP) can help identify these programs.

The connection to other assistance programs

Extra Help doesn't exist in isolation. It's part of a broader network of programs that help low-income Medicare beneficiaries:

Medicare Savings Programs (MSPs): State Medicaid programs that help pay Medicare premiums (Part A and/or Part B), deductibles, and coinsurance. There are four levels — QMB, SLMB, QI, and QDWI — each with different income thresholds and benefits.

Medicaid: Full Medicaid provides comprehensive health coverage beyond what Medicare covers, including long-term care. Eligibility rules vary by state.

SNAP (food assistance) and LIHEAP (energy assistance): Other programs that can reduce your parent's overall living expenses, making the fixed income go further.

If your parent qualifies for Extra Help, they likely qualify for other assistance programs too. The SHIP program and Benefits Checkup (benefitscheckup.org, run by the National Council on Aging) can screen for all available programs in one assessment.

Don't let pride get in the way

One of the biggest barriers to Extra Help enrollment isn't logistics — it's your parent's reluctance to accept "government assistance." Many seniors who've worked their entire lives feel uncomfortable applying for what they perceive as welfare.

The reframing that often helps: Extra Help is a benefit your parent earned through a lifetime of paying Medicare taxes. It's not charity — it's a program specifically designed to ensure that the Medicare system they paid into actually works for them when they need it most.

For a complete walkthrough of Medicare financial assistance programs, eligibility requirements, and application steps, our Medicare Enrollment Guide includes an assistance programs checklist and a benefits screening tool that identifies every federal and state program your parent may qualify for.