ABLE Account Decision Guide Series

ABLE Accounts and Working People with Disabilities

Means-Tested Medicare Support and ABLE Accounts for the Working Beneficiary

This section covers two means-tested programs that help to limit out-of-pocket expenses for Medicare Part B and Part D services.

Medicare Savings Programs (MSPs): Limiting Out-of-Pocket Part B Expenses for Beneficiaries Who Work and Have an ABLE Account

Each of four MSPs pay for Part A and/or B premiums, with one also paying for Part B deductibles and copayments. Eligibility is based on an individual’s income and resources (resource limits cannot be below a federally authorized amount, with some states setting higher resource limits and some states opting not to have resource limits). MSPs are administered through each state’s Medicaid program. See,  https://www.medicaid.gov/federal-policy-guidance/downloads/cib031821.pdf*  for information on income limits for the four MSPs: the Qualified Medicare Beneficiaries (QMB) program, the Selected Low-income Medicare Beneficiaries (SLMB) program, the Qualified Individuals-1 (QI-1) program and the Qualified Disabled Working Individual (QDWI) program. Some states do not have the QDWI program. See Medicare Savings Programs, https://www.medicare.gov/your-medicare-costs/get-help-paying-costs/medicare-savings-programs.

*Note: Medicare.gov has added the $20 general exclusion to the income figures, however, did not provide other disregards such as the earned income exclusion.

Since MSPs are considered a Medicaid benefit, ABLE account savings, up to the ABLE plan balance limit, must be excluded when making eligibility determinations.

At a time when a person is still moving toward financial independence through employment, MSP eligibility guarantees payment of monthly Part B premiums, now set at $148.50 (if first became Part B eligible in 2021). With the MSP paying monthly premiums (plus copayments and deductibles if countable income is low enough to qualify for the QMB program), this can also free up money for additional contributions to the ABLE account.

With less than half of gross earnings counted in determining MSP eligibility, a person can maintain earnings and retain eligibility for an MSP in many cases.

For 2020, three key MSPs allow countable income for an individual up to: $1,084 for Qualified Medicare Beneficiary (QMB) program; $1,296 for the Specified Low-Income Medicare Beneficiary (SLMB) program; and $1,456 for the Qualified Individual-1 (QI-1) program. Given the SSI exclusions that must be used to determine countable earnings ($20 general exclusion + $65 = $85 plus an additional 50 percent excluded), the individual can have significant gross earnings and still be eligible for the MSP. This fact, plus the actual benefits of the MSP, create a surplus cash flow that, in many cases, can be used to pay for work-related expenses and/or to contribute to the ABLE account. https://www.medicare.gov/Pubs/pdf/10126-Getting-Help-With-Your-Medicare-Costs.pdf

A note of caution: Many MSP applicants and beneficiaries have had to educate MSP decision makers about the requirement to use the SSI rules when determining countable earned income. Similarly, they may also have to educate decision makers about the requirement that ABLE account assets, up to the ABLE plan’s balance limit, must be excluded because decision makers must use SSI rules, related to ABLE accounts, in determining asset eligibility for an MSP.

Medicare Part D’s Extra Help Program: Limiting Out-of-Pocket Expenses for Beneficiaries Who Work and Have ABLE Accounts:

When a person enrolls in the Part D prescription drug program, they may face significant out-of-pocket expenses related to monthly premiums, prescription copayments and a non-coverage amount known as the “donut hole.”  Out-of-pocket expenses related to Part D coverage average about $5,000 annually if the beneficiary gets no form of “Extra Help.” Most of those costs can be eliminated if the beneficiary qualifies for Part D’s Extra Help Program, also known as the Low-Income Subsidy Program.

Ways to qualify for Part D Extra Help:

A Medicare beneficiary will qualify for either Partial or Full Extra Help by meeting one of two sets of income and asset tests. Alternatively, a Medicare beneficiary will automatically qualify for Extra Help if they:

People who qualify for the 1619(b) or Medicaid Buy-In work incentives can have significant earned income and ABLE assets and qualify for Full Part D Extra Help because they are dually eligible for Medicaid and Medicare.

When dual eligibility for Medicare and Medicaid is the pathway to Extra Help eligibility, there is no separate Extra Help program analysis of an individual’s income and resources. As explained in the sections above state-by-state 1619(b) eligibility thresholds in 2020 range from $28,114 to a high of $66,740 with individuals able to establish higher, individualized thresholds when certain expenses are high enough; and that state-by-state Medicaid Buy-In for Workers with Disabilities eligibility thresholds allow individuals to have annual earnings of $50,000, $60,000 or more in many states. Despite these high levels of allowable earnings, eligibility for the 1619(b) or MBI category of Medicaid alone is enough to qualify for Full Extra Help and its average $5,000 per year benefit. Additionally, because Medicaid excludes all ABLE account savings, a person who works may safely put significant deposits into their ABLE account each year and maintain Medicaid and Extra Help eligibility.

Many readers will realize that the typical 1619(b) or Medicaid Buy-In beneficiary will have annual earnings much less than some of the figures referenced above. However, in an effort to move toward full financial independence, people face an across the board $2,000 countable resource limit for 1619(b), as it is considered a non-cash form of SSI; and face higher, but still modest resource limits in the MBI programs in most states. No SSI recipients, and very few MBI beneficiaries, are permitted to self-fund retirement accounts as excluded assets. For these beneficiaries, the ABLE account is a way to save toward future independence while working and while in, or for, retirement.

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Note: Our ABLE Decision Guide Series is designed as an aid to decision making as it relates to establishing and using an ABLE account. This document does not cover every possible issue related to the topic and is not a substitute to more in-depth analysis that may be required in some cases.