For purposes of determining subsidy eligibility, we consider all of the countable income the individual and living-with spouse receive (or expect to receive) for a period of 12 months. The subsidy determination system uses the income reported on the subsidy application and projects it for 12 months starting from the subsidy computation month.

The subsidy computation month is the month that the individual files an application for subsidy and is entitled to HI or SMI or both for that month.

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  If the individual files on May 22, 2023 and is entitled to HI or SMI or both for May 2023, the subsidy computation month is May 2023.

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  If the individual files in May 2023 and is not yet entitled to HI or SMI or both in May 2023, the subsidy determination system puts the case in “conditional” status awaiting HI/SMI entitlement. For example, if the individual files for subsidy in May 2023 and becomes entitled to HI or SMI or both in June 2023, the subsidy computation month is June 2023.

This annualized amount of income is compared to the annual Federal Poverty Guideline income limit (FPL) in effect at the time the application is processed to determine eligibility and percentage of subsidy. (For a chart with the FPL income limits, see “Eligibility for Extra Help (Prescription Drug Low Income Subsidy)" HI 03001.020C.3.)

Although we base the computation of income for subsidy eligibility on a 12-month income projection, we do not link the computation to a particular calendar year. The subsidy determination system uses the 12-month projection of income because the Department of Health and Human Services issues the FPL income limits as annual income limits.

When an individual files for subsidy, we compare the 12-month projection of income to the current year’s FPL income limit. If the individual’s projected income is under the limit, they will continue to be eligible for subsidy until a redetermination or a subsidy-changing event is processed. When the redetermination or subsidy-changing event is processed, the system determines whether there is a change in eligibility.

EXAMPLE: Sam files for subsidy in August. The subsidy determination system uses the income reported on the application in August and projects it for 12 months starting from the subsidy computation month without regard to the expected increase in income due to the January Cost-of-Living Adjustment (COLA), or the expected increase in the FPL limits due to the annual FPL update (usually in February). We use this type of computation because the individual’s income for next January and next year’s FPL amount are not known in August when the claim is processed.

For an individual who files an initial claim for subsidy, the subsidy determination system computes income based on a 12-month period starting from the subsidy computation month.

EXAMPLE: Howard, who is already entitled to Medicare A and B, files for subsidy on May 7, 2023. Eligibility for subsidy is determined based on the income reported on the application starting with May 2023. The subsidy determination system projects anticipated income for 12 months starting with May 2023 and compares that annualized amount to the 2023 FPL income limits for a one-person household.

When we compute an individual’s income for a redetermination, the subsidy determination system computes the income based on a 12-month projection of income and compares the income to the FPL limit in effect at the time of the determination. (For more information about subsidy redeterminations, see “Redetermination of Eligibility for Medicare Part D Extra Help (Low-Income Subsidy)” HI 03050.020.)

EXAMPLE: In late August 2023, SSA mails a scheduled redetermination to John. John completes the form, which indicates a change in income and sends it back to SSA on September 19, 2023. SSA redetermines eligibility based on the income reported on September 19, 2023. The subsidy determination system uses the income on this report, projects it for 12 months, and compares this annualized amount to the 2023 FPL income limits to determine the subsidy percentage. If the change reported affects eligibility, the effective date of the change will be January 2024.

When we use a computation of the individual’s income to process a subsidy-changing event, the subsidy determination system computes income based on a 12-month projection of the income and compares it to the FPL limit in effect at the time of the determination. (For more information about subsidy changing events, see “Subsidy Changing Events (SCEs) and Other Events” HI 03050.025.)

EXAMPLE: On June 8, 2023, Johnson reports to SSA they were divorced on May 15, 2023. The divorce, which is a subsidy-changing event, requires SSA to redetermine eligibility for subsidy as of July 2023 (the month after the month SSA received the report of the divorce). Continuing eligibility is determined based on expected income starting from July 2023. The subsidy determination system uses income as of July 2023, projects it for 12 months, and compares this annualized amount to the 2023 FPL to determine eligibility.

When we use the computation of an individual’s income to process an “other event,” the subsidy determination system computes income based on a 12-month projection of the income and compares it to the FPL limit in effect at the time of the determination. (For more information about “other events”, see “Subsidy Changing Events (SCEs) and Other Events” HI 03050.025.)

EXAMPLE: In February 2023, Johnson reports a work stoppage to SSA and explains there is no other income besides Title II benefits. Although this reduction in income could affect eligibility, this is not one of the six subsidy changing events.

SSA will record this event on the Medicare database and mail a redetermination form SSA-1026-OCR-SM-REDE to Johnson in August 2023. The subsidy determination system will use the income on the report, project it for 12 months, and determine the subsidy percentage by comparing the annualized amount to the FPL income limit in effect at the time of the determination. If the income change reported affects eligibility or the amount of subsidy, the effective date of the change will be January 2024.

In the first year that the individual applies for the subsidy, we count the income that the individual expects to receive in the 12-month period starting from the subsidy computation month. The subsidy computation month in this example is June 2023 because the individual filed a subsidy application and is entitled to HI/SMI in the same month.

EXAMPLE: Whitney will be 65 on June 12, 2023. Whitney files for retirement insurance benefits (RIB), Medicare, and Part D subsidy on April 14, 2023. Whitney is working full-time but plans to stop work and will receive a final paycheck on May 15, 2023. On Question 10, Whitney estimates wages of $11,300 in 2023. On Question 13 Whitney indicates a stop-work month of May 2023. Whitney will receive a social security benefit of $1,050 per month with no other income.

Whitney's eligibility for the subsidy is determined based on expected income for a period of 12 months starting with the subsidy computation month, which is June 2023. The subsidy determination system uses the income reported on the application and projects it for 12 months starting in June 2023. The annualized countable income will be $12,360 ($1,050 x 12 months minus the $240 exclusion). The subsidy determination system compares this amount to the 2023 FPL limits for a one-person household and results in a determination that Whitney is eligible for a subsidy because the countable income is less than 150% of the FPL.

NOTE: Wages do not count for the purpose of determining Whitney's eligibility, because Whitney stopped working prior to the subsidy computation month (June 2023). Based on the stop-work month alleged by Whitney, the subsidy determination system is able to determine there are no countable wages.

If Whitney continued to work, all wages or estimated wages for the calendar year filed would be input along with a stop work date (if applicable). The subsidy determination system will project earnings to determine the annualized countable income.

When both members of a married couple, who live together, file for subsidy, we count the income and resources of both spouses. We count the income they expect to receive in the 12-month period starting from the subsidy computation month.

EXAMPLE: The Greens are both over 65 and already entitled to HI/SMI. They apply for the Part D subsidy in March 2023. One spouse receives a social security benefit of $1,030 per month. The other spouse's government pension is $700 per month. The subsidy determination system uses the income reported on their application and projects it for 12 months starting in March 2023. Their annualized countable income is $20,520 ($12,360 + $8400 minus the $240 exclusion). The subsidy determination system compares this amount to the 2023 FPL for a 2-person household. They are both eligible.

When one member of a living-together married couple files for Part D subsidy, we count the income and resources of both spouses. We count the income they both expect to receive in the 12-month period starting from the subsidy computation month. If the second member of the couple later files for subsidy, we determine that spouse’s eligibility for subsidy by counting the income of both spouses starting in the month that the second spouse files. When these individuals are redetermined, we will determine their eligibility as a couple.

EXAMPLE: Martin, age 69, is already entitled to HI/SMI and applies for Part D subsidy on June 5, 2023. Martin's living-with spouse is not applying for subsidy in June. Martin’s eligibility for Part D subsidy is determined based on both spouse's income. Martin receives $900 per month and the spouse receives $650 per month in social security benefits. The subsidy determination system uses the couple’s income reported on their application and projects it for 12 months starting with the subsidy computation month for Martin, which is June 2023.

Martin's spouse becomes entitled to HI/SMI in October 2023 and files a Part D subsidy application. We make a determination of their eligibility based on the expected income of both members of the couple starting from October 2023. To determine the spouse's eligibility, the subsidy determination system uses the couple’s income reported on the spouse's application and projects it for 12 months starting in October 2023. Martin‘s subsidy is not changed when the spouse’s application is processed. Their two individual records will be reconciled at the next redetermination.