Does the $20 income disregard apply to everyone who applies for MSP?

Yes. The $20 general income disregard applies to all MSP applicants — whether your income is from Social Security, a pension, wages, or any combination. It is mandatory and Medicaid offices are required to apply it before testing your income against the eligibility limits.

What counts as unearned income for MSP purposes?

Unearned income includes Social Security benefits (including SSDI and SSI supplemental payments in some cases), pensions, annuities, rental income, interest, dividends, and most other income not from active work. The $20 disregard is applied to unearned income first, with any unused remainder flowing to earned income.

If I have no earned income, does the $65 earned income disregard help me?

No. The $65 earned income disregard — and the 50% reduction that follows it — only apply to wages or self-employment income. If all of your income is unearned (Social Security, pension, etc.), only the $20 general disregard is subtracted before your income is compared to the limit.

Where is the income disregard rule defined in federal law?

The SSI income disregard rules, which MSP eligibility must follow, are codified at 42 C.F.R. § 435.831 and derive from the Social Security Act, Section 1902(r)(2). The specific ordering — $20 to unearned income first — is required by federal statute and may not be altered by individual states.

Does Medicare Part B premium deducted from Social Security count as income for MSP?

Yes and no. Most states count your Social Security benefit before the Part B premium deduction — meaning the gross Social Security amount, not the net amount you receive after the premium is withheld. If you are already enrolled in an MSP, the Part B premium is effectively refunded, so this creates a circular calculation that Medicaid offices handle in the initial enrollment.

$20 Income Disregard for MSP: How It Lowers Countable Income

The income limits for Medicare Savings Programs — $1,350 per month for QMB, $1,616 for SLMB, and $1,816 for QI (in most states for 2026) — are countable income limits, not gross income limits. Federal rules mandate specific disregards that are subtracted from your income before the comparison is made. For many people receiving Social Security, these disregards are the difference between qualifying and being denied.

What Is an Income Disregard?

An income disregard is an amount the government subtracts from your gross income before testing whether you meet an eligibility threshold. Disregards exist because Congress and CMS have decided that certain income should not count against a person's ability to receive benefits — either because it is small enough to ignore or because counting it would penalize work.

MSP uses the same disregard rules as Supplemental Security Income (SSI). That means the specific amounts and the order in which they must be applied are set by federal law, not state discretion. Every Medicaid office in every state must follow the same calculation sequence.

The $20 General Income Disregard

The $20 general income disregard applies to all MSP applicants, regardless of income source. It is the first subtraction made, and it must be applied to unearned income first — Social Security, pensions, interest, dividends, rental income, and similar sources. Only if your total unearned income is less than $20 does the unused remainder flow over to reduce your earned income.

This rule has been in place since the Social Security Act established the SSI income disregard framework in 1972. It applies whether you receive $200 per month or $2,000 per month in Social Security — the $20 subtraction is always the first step.

The $65 Earned Income Disregard and 50% Rule

If you have any wages or self-employment income, two additional disregards kick in after the $20 general disregard is applied. First, $65 is subtracted from your remaining earned income. Then, only half of what is left counts toward eligibility. In practice, this means that a significant portion of wages is excluded from the countable income calculation — Congress designed it this way to avoid penalizing Medicare beneficiaries who continue working.

The Required Order of Operations

The order in which disregards are applied is not optional — federal law specifies the sequence, and Medicaid offices must follow it. Here are the five steps in order:

Step 1: Apply the $20 general disregard to unearned income (Social Security, pension, other).
Step 2: If any of the $20 was unused (because unearned income totaled less than $20), apply the remainder to earned income.
Step 3: Subtract $65 from remaining earned income.
Step 4: Multiply remaining earned income by 50% — only half counts.
Step 5: Add countable unearned income (from Step 1) and countable earned income (from Step 4). The result is your countable monthly income.

Worked Example 1: Social Security Only

Consider a single person in Texas who receives $1,365 per month in Social Security and no other income.

Gross unearned income: $1,365
Minus $20 general disregard: −$20
Countable income: $1,345
QMB limit in Texas: $1,350/month
Result: Qualifies for QMB — annual savings of up to $6,975

Without the $20 disregard, this person's $1,365 gross income would appear to exceed the $1,350 QMB limit. The disregard brings countable income below the threshold. This scenario plays out for millions of Social Security recipients who receive checks slightly above the published income limits.

Worked Example 2: Social Security Plus Part-Time Wages

Now consider a single person who receives $1,200 per month in Social Security and earns $400 per month from a part-time job. Gross income is $1,600 — well above every MSP tier limit. But here is how the disregards work:

Unearned income (Social Security): $1,200
Minus $20 general disregard (applied to unearned first): −$20
Countable unearned income: $1,180
Earned income (wages): $400
Minus $65 earned disregard: −$65 → $335 remaining
Multiply by 50%: $335 × 0.50 = $167.50 countable earned income
Total countable income: $1,180 + $167.50 = $1,347.50
QMB limit: $1,350 — qualifies for QMB

Without any disregards, this person's gross income of $1,600 would appear to exceed all three MSP tiers. After the mandatory disregards, countable income is $1,347.50 — below the QMB threshold. The $400 in monthly wages was effectively reduced to $167.50 for eligibility purposes.

Why This Matters — and What to Do Next

The income limits published for MSP programs are often quoted without mentioning that they apply to countable income, not gross income. This gap causes many people to assume they earn too much and never apply. If your Social Security check or total monthly income is within roughly $200 of any MSP tier limit, the $20 disregard alone may tip you into eligibility.

Our free eligibility checker applies the mandatory disregards automatically, using your exact income sources and state rules. It takes about two minutes — check your MSP eligibility now to see your countable income and which tier you qualify for.

Disclaimer: Income limits and disregard rules reflect 2026 federal standards. MSP eligibility is determined by your state Medicaid office. Consult a free SHIP (State Health Insurance Assistance Program) counselor or benefits specialist for personalized guidance.

How the $20 Income Disregard Lowers Your Countable Income for MSP Eligibility