Learn How Medicare LIS Drug Cost Programs Work

What Is the Medicare Low Income Subsidy (LIS) Program?

The Medicare Low Income Subsidy (LIS) program, also called "Extra Help," is a federal program designed to help people with limited income and resources pay for prescription drug costs under Medicare Part D. This program was created as part of the Medicare Modernization Act of 2003 and became available starting in 2006. The program works by reducing the amount of money people pay out of pocket for covered medications.

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The LIS program operates through the Social Security Administration and the Centers for Medicare and Medicaid Services (CMS). When someone receives assistance through this program, their copayments, coinsurance, and deductibles for covered Part D drugs are reduced significantly. In 2024, for example, individuals with incomes up to 150% of the federal poverty level may receive support through this program. For a single person, this means an annual income of approximately $20,385 or less; for a married couple, it's roughly $27,465 or less.

The program works in coordination with Part D drug plans, which are offered by private insurance companies. When someone uses LIS, their prescription drug plan processes the subsidy automatically at the pharmacy. The pharmacy sees the subsidy information in the system and charges the person only their reduced copayment amount, while the government pays the insurance company the remaining cost of the medication.

One important aspect of LIS is that it covers both brand-name and generic medications. If a person is taking a brand-name drug and their plan covers a generic alternative, they may need to pay a slightly higher copayment for the brand-name version. However, the LIS program still reduces this cost substantially compared to what individuals without assistance would pay.

Takeaway: LIS is a federal program that reduces prescription drug costs for people with lower incomes. Understanding that it works automatically with Part D plans helps clarify how the program functions in real-world pharmacy visits.

Understanding Income and Resource Limits

Income and resource limits determine who may receive help through the LIS program. These limits change each year based on federal poverty guidelines. The Social Security Administration updates these thresholds annually, usually in January. The income limit for LIS is set at 150% of the federal poverty level, which is higher than many other assistance programs.

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In 2024, the monthly income limits are $1,699 for an individual and $2,289 for a married couple. These numbers include all sources of income: Social Security benefits, pensions, wages, interest, dividends, rental income, and other earnings. However, certain types of income are not counted. For example, Supplemental Security Income (SSI) payments are not counted as income for LIS purposes. Some people receive both SSI and another type of Social Security benefit; in these cases, only the non-SSI portion counts.

Resource limits also apply to the LIS program. Resources include savings accounts, stocks, bonds, and other assets a person owns. The current resource limit is $17,100 for an individual and $25,650 for a married couple, as of 2024. These limits also increase each year. A person's home and one vehicle do not count toward resource limits, nor do most household goods and personal items.

Some people have circumstances that affect how their income is counted. For instance, if someone is caring for a grandchild and that grandchild lives with them, there are special rules that may exclude some of the grandchild's income. Similarly, if an individual receives support from family members or organizations, there are specific ways this is counted or not counted. These situations require review on a case-by-case basis with the Social Security Administration.

It's also important to note that income and resource limits are checked at the time someone receives LIS. However, circumstances change throughout the year. If someone's income increases, it's important to report this to Social Security. Similarly, if someone receives an inheritance or other large payment, this may affect their resource level. The program allows for a review of circumstances if there are significant changes during the year.

Takeaway: Income limits at 150% of poverty and resource limits around $17,100-$25,650 determine who may receive LIS. Knowing these limits helps individuals understand whether they should look into this program further.

How Drug Costs Are Reduced Under LIS

The LIS program reduces drug costs by lowering or eliminating copayments and deductibles for covered medications. The amount of the reduction depends on the person's income level relative to the poverty guidelines. The Social Security Administration places people into different categories based on their income, and each category receives a different level of cost reduction.

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People with income between 100% and 150% of the poverty level typically receive the highest level of assistance. In 2024, this group generally pays copayments of just $1.15 for generic drugs and $3.70 for brand-name drugs at most pharmacies. These are substantially lower than what people without assistance pay. Additionally, people in this income range have no deductible to pay before their drug coverage begins.

People with income below 100% of the poverty level may receive slightly higher cost-sharing, depending on their specific income level and the plan they choose. However, even at this assistance level, copayments remain low—typically in the range of $3-$5 for generic drugs and $5-$10 for brand-name drugs. The exact amounts can vary slightly by plan and year.

The LIS program also helps with costs during the Part D coverage gap, often called the "donut hole." This gap occurs after a person and their insurance have spent a certain amount on covered medications in a calendar year (in 2024, this threshold is $5,850). Normally, people in the coverage gap pay a larger share of drug costs. However, if someone has LIS, their costs continue at the low copayment rates even during the coverage gap. This is one of the most significant benefits of the program.

Understanding the copayment structure is important when choosing a Part D plan. Some plans offer the same copayment amounts for all covered drugs, while others have different tiers. The LIS program works with both types of plans. At the pharmacy, when a person with LIS presents their insurance card, the pharmacy's computer system recognizes the subsidy and applies it automatically. The person pays only their copayment amount, and the rest is paid by the program and their insurance plan.

Takeaway: LIS reduces copayments to $1-$10 range and eliminates deductibles for most people. The subsidy is applied automatically at the pharmacy, making the cost reduction straightforward during prescription pickups.

The Process for Using LIS at the Pharmacy

When someone has been approved for LIS and is enrolled in a Part D plan, using the program at the pharmacy is a straightforward process. The person presents their prescription drug insurance card to the pharmacist along with their prescription. The pharmacy's computer system checks the insurance company's records and sees that the person has LIS coverage. The pharmacist then processes the prescription using the LIS copayment amounts, not the standard copayment amounts that people without assistance pay.

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At the counter, the person pays only their LIS copayment amount. This amount is typically displayed on a receipt or on a screen the pharmacist shows. After paying, the person receives their medication. The pharmacy sends the remaining claim to the insurance company, and the insurance company sends payment to the pharmacy. The government's subsidy payment to the insurance company is tracked separately but is part of this overall process.

It's important that the person using LIS understands their specific copayment amount before going to the pharmacy. This amount should be listed in any notices or documents received from Social Security or the insurance company. If there's confusion about the amount, the person can ask the pharmacist to explain it or contact their insurance plan's customer service number, which is on the back of their insurance card.

Sometimes, a prescribed medication may not be on the insurance plan's formulary, which is the list of covered drugs. If this happens, the pharmacist may discuss options with the person. These options might include using a different medication that is on the formulary, requesting a prior authorization or exception from the insurance company, or paying out of pocket. The LIS copayment is only available for drugs that are covered by the plan.

If the pharmacy's system doesn't recognize the LIS coverage, the person should bring this to the pharmacist's attention. This could happen if there's been a recent change in enrollment, if the Social