Extremely low cost-of-living adjustments (COLAs) not only affect Social Security benefits, the 0.3% COLA also affects the amount of Medicare Part B premium people will pay in 2017. When no, or a very low, COLA occurs, a provision of law known as “hold harmless” is triggered. Under the provision, when an individual’s Social Security COLA is insufficient to cover the increase in the individual’s Medicare Part B premium, the Part B premium is adjusted so that the Social Security benefit isn’t reduced from one year to the next.
While the provision is valuable protection, it doesn’t apply to all Medicare Part B enrollees. Roughly 30% of all Part B beneficiaries will not be protected in 2017. Those people are facing a Part B premium increase of about 22.3%, from $121.80 per month to $149.00, the highest increase in 27 years. People who are not protected by the hold harmless provision include:
- Medicare Part B enrollees who don’t receive Social Security benefits. This includes people who have delayed the start of Social Security and all people who are billed for Medicare. According to the Kaiser Family Foundation, in 2013 about half of all people on Medicare who don’t receive Social Security yet had incomes below $33,000.
- Higher-income beneficiaries. People with modified gross incomes of $85,000 (individuals) or $170,000 (couples) in 2017 are required to pay higher Part B premiums, depending on income.
- Low-income beneficiaries who receive Medicaid in addition to Medicare. State Medicaid programs pay the Part B premiums for people who qualify due to low income and resources. According to the Kaiser Family Foundation, there are approximately 10 million dually-eligible beneficiaries representing about two-thirds of those who are not protected by hold harmless.
- New Medicare Enrollees in 2017. Because these people are new to Medicare they have not had an increase in the Part B premium. Thus, they must pay the full amount in 2017 when they sign up.
Bottom line: Everyone in 2017 is expected to pay more for their Medicare Part B premiums. Any increase in benefits due to the COLA will be completely eaten up by the expected increase in Medicare Part B premiums. Nevertheless, for the majority of beneficiaries, the rising Part B premiums, at least, will not reduce benefits — but hold harmless protection only applies to Part B premiums. Any increase in the premiums of Medigap supplements, Part D, or Medicare Advantage plans would reduce one’s Social Security income. In November, beneficiaries will be receiving notification through the mail of what they will pay for Medicare Part B in 2017.