Low-Income Subsidies for the Medicare Prescription Drug Benefit: The Impact of the Asset Test

Apr 13 2005

An estimated 2.4 million Medicare beneficiaries with incomes low enough to qualify for additional subsidies under the new Medicare drug benefit are expected to be ineligible for these subsidies because they do not meet the asset test required by law, according to a new study from the Kaiser Family Foundation.

The study, by Thomas Rice, Ph.D., and Katherine A. Desmond, M.S., assesses the impact of the requirement that low-income people with Medicare meet an asset test in order to receive additional help paying premiums and cost-sharing under the new Medicare drug benefit. To qualify for the extra assistance, beneficiaries must have incomes below 150% of the federal poverty level ($14,355 for an individual in 2005) and must have no more than $10,000 in assets for an individual and $20,000 in assets for a couple. The value of a home, automobiles, and household furnishings and possessions do not count toward this asset limit.

The study estimates that, absent the asset test, about 14 million people with Medicare could qualify for the low-income subsidies. After assets are considered, the study finds that about 11.6 million beneficiaries would remain eligible.

Nearly half (46 percent) of those excluded because of the asset test are widows or widowers, the study finds. According to the study, a likely scenario is that when a husband dies, the widow’s income plummets, but her accumulated assets exceed those allowed under the legislation, particularly because the asset threshold is lower for individuals than for couples.

The study, “Low-Income Subsidies for the Medicare Prescription Drug Benefit: The Impact of the Asset Test,” is available online. Other Kaiser Family Foundation resources on the Medicare drug law are available online. Please click here to access these resources.