Chapter Seven-Medicare Savings Program

1. Sources of law. The Medicaid law is Title XIX of the Social Security Act. The Medicaid law is at 42 U.S.C. §1396. It requires that states operate their Medicaid programs under a State Medicaid Plan. The Texas state statute which authorizes the Medicaid program is Chapter 32 of the Texas Human Resources Code. The Medicaid rules for the programs discussed in this chapter are found at 40 Texas Administrative Code §§15.200 – 15.220. The law requires states to provide Medicaid for low-income families, for persons receiving SSI, and for persons qualifying for Title XIX long-term care (“Nursing Facility Medicaid”). The law also requires states to provide a limited type of Medicaid for certain low-income persons who are enrolled in Medicare. These persons are called “dual eligibles.” The programs they qualify for are now called “Medicare Savings Programs.”

2. There are four of these Medicare Savings Programs: Qualified Medicare Beneficiary Medicaid (QMB); Specified Low-Income Medicare Beneficiary Medicaid (SLMB); Qualifying Individual – 1 (QI-1); and Qualified Disabled Working Individuals (QDWI).

3. The Medicaid benefits that QMBs, SLMBs, QI-1s, and QDWIs receive are limited. The benefits are payment of some or all of the Medicare cost-sharing amounts (premiums, co-insurance, and deductibles).

4. Qualified Medicare Beneficiaries (QMBs). A QMB is an aged or disabled Medicare beneficiary who has: (1) income at or below the Federal poverty line; and (2) resources below 200 percent of the resources limit set for the Supplemental Security Income (SSI) Program (the QMB resources limits are $4,000 for an individual and $6,000 for a couple). An individual’s home and household goods are excluded as resources.

5. To meet the QMB definition, the person must be entitled to Medicare Part A. Included is the relatively small group of aged persons who are not automatically entitled to Part A coverage, but who have bought Part A protection by paying a monthly premium. Not included are working disabled persons who have exhausted Medicare Part A entitlement but who have extended their coverage by payment of a monthly premium. A person can be eligible for Medicare due to age (65); disability (receipt of 24 months of Social Security disability benefits which allows for Medicare eligibility with the 25^th month); and due to end-stage kidney disease.

6. For QMBs, Medicaid is required to pay Medicare premiums and cost-sharing charges as follows: (1) Part B monthly premiums; (2) Part A monthly premiums paid by the limited number of persons not automatically entitled to Part A protection; (3) coinsurance and deductibles under Part A and Part B including the Medicare hospital deductible, the Part B deductible, and the Parts A and B coinsurance; and (4) coinsurance and deductibles that M+C plans charge their enrollees.

7. Payment of QMB benefits. Medicaid is required to pay Part A and Part B premiums in full for the QMB. Medicaid is also required to pay the requisite deductibles and coinsurance, though the actual amount of the payment may vary. At present Medicare assignment must be accepted if Medicaid is to pay deductible and coinsurance amounts.

8. Specified low-income Medicare beneficiaries (SLMBs). Medicaid is also required to pay Medicare Part B premiums for SLMBs. These are persons meeting the QMB criteria except that their income is slightly over the QMB limit. The SLMB income limit is 120 percent of the Federal poverty line. SLMB is limited to payment of the Medicare Part B premiums, unless the beneficiary is otherwise eligible for Medicaid.

9. Qualifying individuals (QI-s). The Balanced Budget Act of 1997 required State Medicaid Programs, effective January 1, 1998 through December 31, 2002, to pay Part B premiums for beneficiaries with incomes up to 135 percent of poverty. These persons are referred to as QI-1s. The QI-1 program remains in effect in 2004.

10. Qualified disabled and working individuals (QDWIs). Medicaid is authorized to provide partial protection against Medicare Part A premiums for QDWIs. QDWIs are persons who were previously entitled to Medicare on the basis of a disability, who lost their entitlement based on earnings from work, but who continue to have the disabling condition. Medicaid is required to pay the Medicare Part A premium for such persons if their incomes are below 200 percent of the Federal poverty line, their resources are below 200 percent of the SSI limit, and they are not otherwise eligible for Medicaid.

11. SSI rules are used to determine what counts as income and what counts as resources. These Medicare Savings Programs all have income and resource rules that follow the SSI methods for determining what counts as income and resources. Thus, you can use the information regarding countable earned and unearned income, and regarding resources, in Chapter Ten (Medicaid and Supplemental Security Income). If only one spouse of a couple is a Medicare beneficiary, the couple’s combined countable income is first compared to the couple income limit. If that limit is not exceeded, then the individual’s countable income is compared to the individual income limit. If that limit is not exceeded, income eligibility exists. The difference among the four dual eligibility programs is that countable income at varying levels, results in varying benefits. In general, the higher the countable income, the less favorable the benefits.

12. The income limits for these programs change every April 1, the resource limits do not usually change from year to year, and the value of the benefits changes every January 1. The income limits for these programs are based on the federal poverty income limits (FPIL). Because the FPIL increases each April 1, that is when the income limits for these programs increase. Since the vast majority of the beneficiaries of these programs receive Social Security, the annual Social Security cost-of-living increase (which occurs every January 1) is disregarded until April 1. At that time, an automatic review of computer tape data occurs, to update the amount of countable Social Security. As with SSI, the homestead, a car used to get to and from medical treatment, personal belongings and household possessions, pre-paid burial items, and $1500 per spouse of life insurance or burial insurance, are excluded from counting as resources. Just as with SSI, the resource limits for these programs do not vary from year to year. Unlike SSI, at present there is not a transfer-of-resource penalty under these programs. The value of the benefits under these programs increases each January 1, because that is when the Medicare premiums, deductibles, and cost-sharing amounts increase.

13. Income limits effective April 1, 2004. The monthly income limits for these programs as of April 1, 2004, are: QMB: Individual -- $776; couple -- $1,041. SLMB: Individual -- $931; couple -- $1,249. QI-1: Individual -- $1,048; couple -- $1,406. QDWI: Individual -- $1.552; couple -- $2,082. These levels are 100% FPIL (QMB); 120% FPIL (SLMB); 135% FPIL (QI-1); and 200% FPIL (QDWI).

Program	Monthly Income Limit
	Single Person	Couple
QMB	$ 776	$ 1,041
SLMB	931	1,249
QI-1	1,048	1,406
QDWI	1.552	2,082

14. In calculating income, if a person is receiving Social Security and (as is typical) has the Medicare Part B premium deducted from the Social Security benefit, the actual countable Social Security benefit is $66.60 higher than the amount of Social Security direct deposited into the account of the beneficiary, or received by check. Another point is this: Because SSI rules are used to arrive at countable income, there is the general exclusion of $20 of unearned income. The figures in paragraph 13 already have this $20 factored in.

15. If the individual (or couple) has earned income, the first $65 of monthly earned income is disregarded, and then one-half of the rest of the earned income is disregarded. (If unearned income did not totally consume the $20 disregard, whatever remains of that $20 disregard is also deducted from earned income.) Example: Couple has no monthly unearned income. Couple has monthly combined earned income of $1,885. Countable income is $1,885 minus $20 minus $65 minus ½ the remainder, resulting in ($1,885-$85-$900) which equals $900. Both spouses have end stage kidney disease and are enrolled in Medicare. Countable resources are $5,500. The couple qualifies for QMB.

16. The resource limits. After excluding resources that are excluded under the SSI program, the general allowable resource amount under these programs is $4000 for a single individual and $6000 for a couple. If only one spouse of a couple has Medicare, nonetheless the couple resource limit applies.

17. The value of the benefits in the year 2004. Because the benefit of these programs is payment of all or some of the Medicare premiums, deductibles, and coinsurance amounts, when those amounts increase each January 1, the value of the benefit of these programs increases.

18. QMB’s benefits. QMB, for persons certified for it, pays all of the person’s Medicare cost-sharing – premiums, co-payments, and deductibles. For most persons certified for QMB, the Medicare Part A premium is not a cost the person pays. Usually, Medicare beneficiaries have “paid” for Medicare Part A, through payroll taxes. But assume that a person certified for QMB has to pay the Medicare Part A premium. Assume it is the full, year 2004 Part A premium ($343 monthly), and not just the Part A premium for those who have at least 30 credits of Social Security coverage (a $189 monthly premium). For such a “QMB,” the value of the benefit would be the $343 monthly Part A premium, the $66.60 monthly Part B premium, each Part A hospital deductible incurred ($876 per benefit period), all hospital co-insurance amounts ($219 per day for days 61 – 90, and $438 per day for days 91 – 150), the skilled nursing facility copayment ($109.50 per day for days 21 – 100), the 20% deductible for durable medical equipment, the $5 co-pay for hospice prescriptions, the 5% co-pay for hospice inpatient respite care, the $100 Part B annual deductible, the 20% Part B co-pay, the 20% co-pay for Part B outpatient physical, occupational, and speech-language therapy, the 50% co-pay for outpatient mental health services, and all other Medicare Part B co-pays. (Most QMBs do not have a premium for Medicare Part A, so for most “QMBs” the benefit eliminates payment of the other items listed. But, if a QMB does have a Medicare Part A premium (either the full $343 monthly premium, or the reduced $189 premium), the QMB program pays that as well.)

19. SLMB’s benefits, and QI-1’s. Both the SLMB program and the QI-1 program have the same benefit: Payment of the monthly Part B premium. In the year 2004, this is $66.60 monthly.

20. QDWI’s benefit. The benefit of QDWI is payment of the Medicare Part A premium. Thus, whichever premium the “QDWI” would have to pay – the full $343 monthly premium or the reduced $189 monthly premium – that is the value of the QDWI benefit.

21. Once people are certified for QMB, SLMB, QI-1, or QDWI, any Medicare premium that the person was paying will be paid by the program. That means, for instance, that QMBs, SLMBs, and “QI-1s” will no longer see the $66.60 reduction in their Social Security benefit, which occurs due to the Medicare Part B premium being taken out of the Social Security benefit.

22. Benefits under the SLMB and QI programs can be paid retroactive for three months, if the person would have been eligible in those earlier three months before the person applied. This is provided for at 40 Texas Administrative Code §§15.204 (2) and 15.220 (b). QMB and QDWI do not have this “three-month prior” coverage. 40 Texas Administrative Code §§15.201 (f); 15.203 (b).

23. The application form. These programs use application form 1200 EZ. It is Appendix A. This form should also be available at your area agency on aging. If it is not, the Legal Hotline for Texans can send it you. Simply call their administrative line (512/477-3977) and request the form 1200 EZ. The application normally can be handled entirely by mail and phone; no face-to-face interview is required. As with all applications for medical benefits, all information supplied must be truthful, and is subject to verification. The application form should also be available at the local office of the Texas Department of Human Services. However, not all offices of the Department of Human Services process the form 1200 EZ. You will need to check with your local office of the Texas Department of Human Services to determine if it processes the form 1200 EZ.

24. Appeals. The appeals process for these programs is governed by the same rules, as for regular Medicaid and long-term care Medicaid. These rules are discussed in Chapter Fourteen. (Appeals, Hearings, and Administrative Law). Benefits counselors can handle these appeals if the client requests.

25. A few words about Medigap policies and the Medicare Savings Programs. The Medicare law is Title XVIII of the Social Security Act. It is codified at 42 United States Code §§1395. As noted at the outset, the Medicaid law is Title XIX of the Social Security Act. It is codified at 42 United States Code §§1396. Medigap policies (formally called “Medicare supplemental health insurance policies”) are regulated by a part of the Medicare law, namely 42 U.S.C. §1395ss.

26. At 42 U.S.C. §1395ss(q)(5)(A), one finds a requirement that Medigap policies be capable of suspension without penalty for a 24 month period, if a person becomes eligible for a Medicare Savings Program. This section of the Medicare law states, “Each Medicare supplemental policy shall provide that benefits and premiums under the policy shall be suspended at the request of the policyholder for the period (not to exceed 24 months) in which the policyholder has applied for and is determined to be entitled to medical assistance under subchapter XIX [the Medicaid program].” Because the Medicare Savings Programs are actually Medicaid programs, this right to suspend a Medigap covers people who enroll in a Medicare Savings Program.

27. In order to benefit from this right to suspend a Medigap policy, the person must notify the issuer of the policy within 90 days after the date that the person becomes entitled to Medicaid (within 90 days after the person becomes entitled to a Medicare Savings Program). If the person ceases to be entitled to a Medicare Savings Program (or to other Medicaid) the person has a right to be reinstated to the Medigap policy, if the person notifies the issuer of the policy within 90 days after the end of Medicaid entitlement. As noted, these concepts are set forth in 42 U.S.C. §1395ss(q)(5)(A).

28. The terms of the Medigap policy to which a person has a right to reinstatement must not require any waiting period for pre-existing conditions, must provide for coverage which is substantially equivalent to the coverage the person had before the person suspended the Medigap policy, and must provide for premiums which are at least as favorable as the person had before the Medigap policy was suspended.

29. Another aspect of the relationship between Medigap polices and the Medicare Savings Programs concerns the prohibition against selling a Medigap policy that duplicates Medicaid benefits. Under 42 U.S.C. §1395 ss(d)(3)(A)(i), it is unlawful to sell a Medigap policy that duplicates coverage that a person would have under Medicare or Medicaid. However, this prohibition is not violated if the State Medicaid program pays the premiums for the Medigap policy, or if the person is entitled to QMB and the Medigap policy provides for coverage of outpatient prescription drugs, or the person is only entitled to payment of Medicare Part B premiums. Thus, it is lawful to sell a Medigap policy to a person entitled to QMB if the Medigap policy covers outpatient prescription drugs. It is lawful to sell a Medigap policy to persons entitled to SLMB or QI-1, whether or not the policy provides for coverage of outpatient prescription drugs.

30. Of course, the decision of whether a Medigap policy should be bought is one that a person entitled to Medicare Savings Program would have to evaluate, based on individual circumstances.

31. All recipients of QMB, SLMB, and QI will be able to receive the “transitional assistance” of $600 per year in 2004 and 2005 under Medicare Part D, in connection with the Medicare Prescription Discount Drug Cards. “Transitional assistance” also includes payment of the $30 annual enrollment fee for a discount drug card. Recipients of QDWI will be able to use the Medicare discount drug cards, but they will not receive transitional assistance, unless their income is below 135% of FPIL.

32. When the main prescription drug benefit under Medicare Part D starts on January 1, 2006, all recipients of QMB, SLMB, and QI will qualify as “full-premium low-income subsidy eligible individuals.” They will not have to pay a premium for Part D, nor a deductible. Their cost-sharing will be limited to $2 per generic or multiple source drug, $5 for any other drug, or 5%, whichever is greater. Once drug expenses for QMBs, SLMBs, and QIs have been incurred (including the cost of drugs) that reach the “out-of-pocket” threshold, these persons will not have further cost-sharing for drugs covered under their prescription drug plan. Recipients of QDWI will be able to enroll in Medicare Part D, but they will not be considered “subsidy eligible,” unless their income is below 150% of FPIL.

33. The Legal Hotline for Texans provides back-up and support. Any benefits counselor of a Texas area agency on aging who needs back-up and support can call the Legal Hotline for Texans at 1-800-880-9797.