Medicare is the federally funded insurance program for people 65 older as well as people who are disabled. It covers approximately 80% of medical costs for its beneficiaries. That other 20% can be quite a burden for someone who has large medical bills, or anyone with a very low income.

According to a recent study, around 15 million elderly and disabled Medicare beneficiaries spend 20% or more of their household income in premiums and out-of-pocket costs. It is the low-income Medicare beneficiaries who are typically faced with bigger out-of-pocket cost burdens since they are least likely to purchase a Medicare supplement “Medigap” plan.

Medigap insurance policies are there to help bridge the gap between what Medicare pays and what is not covered, About 45% of Medicare recipients make less than $24,000, so many either don’t sign up for a Medigap plan, or a low-cost Medicare Advantage plan – or they don’t understand the benefits of doing so.

Medicare Costs Explained

Certain costs are common for all beneficiaries without Medigap insurance. Every year a recipient goes to the hospital, he or she has to meet the annual deductible of $1,316. They also have  to pay for approximately 20% of medical or doctor service fees.

A Medigap insurance policy covers the gap between what Medicare covers (80%) and what it does not (20%). On average a Medigap policy runs about $2000 per year.

Medicare Advantage plans are a way to get Medicare through a private company. While these plans still leave you with some out-of-pocket costs, they do have stop-losses that prevent you from experiencing the major costs that Original Medicare could leave you paying. They are also very inexpensive, and often have no cost at all.

What Can Low-income Medicare Beneficiaries Do To Minimize Their Costs?

Medicare Savings Program (MSP) pays for Medicare Part A and D premiums, deductibles, copays and coinsurance for those with limited incomes. MSP also helps pay for Medicare Part B. Medicare Part A is premium free. Eligibility for MSPs is determined by your state Medicaid office.

Extra Help, a Medicare Program for prescription drug, provides assistance to low-income Medicare beneficiaries by lowering the premiums and the cost of prescription drugs.

Many states offer State Pharmacy Assistance Programs (SPAP). These programs help low-income individuals pay for prescriptions based on their financial situation, their age and their medical condition.

Assistance with prescription drug coverage is available for elderly and disabled people through PACE (Programs of All-Inclusive Care for the Elderly). This program provides resources that are equivalent to nursing home services but which allow the enrollee to remain at home. PACE covers doctors visits, home care, hospital visits, transportation and home care as well.

Sign up for a Medicare Advantage plan. These plans will limit your total exposure, and are particularly valuable when you would be otherwise facing large medical bills.

Having a Medigap plan can really help reduce your out-of-pocket costs. However, if circumstances prevent you from having one, make sure to check out the programs we’ve mentioned above to lessen your medical cost burdens.

Wiley Long is founder and president of Medigap Advisors, and is passionate about helping people navigate the confusing waters of Medicare. He is the author of The Medicare Playbook: Designing Your Successful Health Coverage Strategy, a clear and simple explanation so you can make the most of your Medicare coverage. For more information visit