What Does LIS Cover for Medicare Prescription Drugs?
Uncover how Medicare's Low-Income Subsidy ("Extra Help") provides crucial financial relief for prescription drug expenses. Understand this vital federal program.
The Low-Income Subsidy (LIS), also known as “Extra Help,” is a federal program designed to assist Medicare beneficiaries with prescription drug costs. Administered primarily through the Social Security Administration, this initiative helps make essential medications more affordable by reducing various expenses associated with Medicare Part D plans. Extra Help aims to support individuals with limited income and resources, significantly lowering out-of-pocket costs and allowing access to necessary medications.
Eligibility for Low-Income Subsidy
To qualify for Extra Help, individuals must be enrolled in Medicare Part A, Part B, or both, and reside in one of the 50 states or the District of Columbia.
Income limits for Extra Help are set annually, based on 150% of the Federal Poverty Level (FPL). For 2025, an individual’s annual income must be below $23,475, and for a married couple, below $31,725. These figures are updated annually, and current guidelines are available on the Social Security Administration’s website. Certain situations, such as earnings from work or supporting other family members, may allow some individuals to qualify even if their income slightly exceeds these thresholds.
Resource limits also determine eligibility. For 2025, an individual’s countable resources must not exceed $17,600, and for a married couple, the limit is $35,130. Countable resources include money in checking and savings accounts, stocks, bonds, and real estate other than the primary residence. Assets not counted include the home where one lives, one vehicle, personal possessions, and life insurance policies.
Some Medicare beneficiaries automatically qualify for Extra Help. This includes individuals who receive full Medicaid coverage, those enrolled in a Medicare Savings Program, or those who receive Supplemental Security Income (SSI) benefits. These individuals are typically notified of their automatic enrollment and the level of assistance they will receive.
Benefits of Low-Income Subsidy
Extra Help provides substantial financial relief by reducing various costs associated with Medicare Part D prescription drug coverage. Beneficiaries often see a significant reduction or complete elimination of their monthly Part D plan premiums.
The program reduces or eliminates the annual deductible for prescription drugs, which is set at $590 for many Part D plans in 2025. This means beneficiaries can begin receiving coverage for their medications sooner without a large upfront payment. Extra Help also lowers out-of-pocket costs through reduced copayments or coinsurance. For 2025, most Extra Help recipients will pay no more than $4.90 for generic drugs and $12.15 for brand-name drugs.
A key change in 2025 is the elimination of the “donut hole” or coverage gap. LIS beneficiaries pay minimal copayments even through this phase. Once total out-of-pocket costs reach the catastrophic threshold of $2,000 for 2025, beneficiaries pay nothing for prescriptions for the rest of the year.
Extra Help also offers other advantages, such as an exemption from the Medicare Part D late enrollment penalty. This penalty typically applies to individuals who do not sign up for Part D when first eligible and can result in higher premiums. LIS recipients also gain access to Special Enrollment Periods, allowing them to change their Medicare Part D plan outside standard enrollment periods if their needs change.
Applying for the Low-Income Subsidy
Individuals can apply for Extra Help through the Social Security Administration (SSA). The application process offers several methods. Many find it convenient to apply online directly through the SSA’s official website, which provides a step-by-step guide. Alternatively, individuals can apply by phone by calling the SSA’s toll-free number, or in person by scheduling an appointment at a local Social Security office.
Before applying, gather all relevant financial information for yourself and your spouse, if applicable. This includes Social Security numbers, Medicare numbers, and detailed records of income from all sources, such as Social Security benefits, pensions, and employment. Documentation related to resources like bank statements, investment accounts, and any real estate holdings other than the primary residence will also be necessary.
After an application is submitted, the Social Security Administration reviews the provided information to determine eligibility and the level of subsidy. The SSA communicates its decision by mail, typically within a few weeks. If approved, beneficiaries can then select a Medicare Part D prescription drug plan that suits their needs, or if they do not choose one, the government will enroll them in a plan.
Reporting Changes and Annual Review
Once approved for Extra Help, beneficiaries must report any significant changes in their financial situation or living arrangements to the Social Security Administration. Alterations in income, resources, or marital status can affect eligibility for Extra Help or the level of assistance received. Guidance on how to report changes, whether online, by phone, or through mail, is available through the SSA.
The Social Security Administration conducts an automatic annual review to re-determine each beneficiary’s LIS eligibility for the upcoming year. Beneficiaries typically receive a letter from the SSA in the fall, informing them of their Extra Help status for the following calendar year. This notification outlines any adjustments to their subsidy and explains any actions they may need to take to maintain their benefits.