Edward Cates, Chairman of the Board, TSCL
Q: How Could the COLA Affect Medicare Costs?
A: Rising Social Security income due to the COLAs will provide some greatly needed relief from rising prices. But the increased income from the COLA can impact your Medicare costs down the road. Knowing what to plan for is important to avoid unpleasant Medicare cost surprises later.
In fact, any increase in the income of a Medicare beneficiary — whether due to COLAs, earnings from jobs, retirement savings, or pensions — could potentially affect what you pay for Medicare premiums if your income is over certain thresholds. This premium surprise is non-discriminatory, affecting both those with the highest incomes as well as those with the lowest, but in different ways.
Q: How are low-income Medicare beneficiaries affected?
A: Those who receive low-income assistance for healthcare costs can be subject to trims in the amount of assistance they receive through Medicare Savings programs or Medicare Extra Help, or Medicaid. Increased incomes due to the COLA can make older and disabled beneficiaries ineligible for the level of benefits received when their income exceeds the limits. This can happen when COLAs increase Social Security benefits faster than inflation adjustments increase the federal poverty guidelines, which are used to determine eligibility for these programs. The consumer price index that the government uses to adjust federal poverty levels grew more slowly in 2022 than the index used to calculate COLAs. Thus, many older households reported adjustments to the amount of low-income assistance that they received in 2022, despite historic rates of inflation.
According to TSCL’s recent Seniors Priority Plan Survey, 38% of survey participants who received low-income assistance in 2021 said their benefits were reduced to a lower level of assistance in 2022 due to the 5.9% COLA received this year. In addition, 16% reported that because their income was right on the borderline, they lost access to one or more low-income programs altogether.
TSCL’s most recent survey found that 83% of survey respondents support enactment of legislation that would temporarily protect low-income Social Security recipients in 2023 from losing their low-income assistance due to the 8.7% COLA.
Q: How are higher income Medicare beneficiaries affected?
A: Individuals with modified adjusted gross income of more than $97,000 and joint filers with incomes of more than $194,000 pay “income related monthly adjustment amount” (IRMAA). This a surcharge paid on Part B and Part D premiums when income is above these levels.
The Social Security Administration uses the most current tax return to figure the Part B premium for the following year. That creates a two-year lag time between the year in which the COLA is received and when Part B premiums may be affected by IRMAA premium surcharges. That means the 5.9% COLA received in 2022 will affect Part B and Part D premiums in 2024, and the 8.7% COLA in 2023 will affect those premiums in 2025.
The following table illustrates the IRMAA for Part B premiums:
|Full Part B Coverage|
|Beneficiaries who file individual tax returns with modified adjusted gross income:||Beneficiaries who file joint tax returns with modified adjusted gross income:||Income-Related Monthly Adjustment Amount||Total Monthly
|< $97,000||< $194,000||$0.00||$164.90|
|$97,001 - $123,000||$194,001 - $246,000||$65.90||$230.80|
|$123,001 - $153,000||$246,001 - $306,000||$164.80||$329.70|
|$153,001 - $183,000||$306,001 - $366,000||$263.70||$428.60|
|$183,001 - $500,000||$366,001 - $750,000||$362.60||$527.50|
|> $500,001||> $750,001||$395.60||$560.50|
The following table illustrates the income related monthly adjustment costs for Part D in 2023:
|Beneficiaries who file individual tax returns with modified adjusted gross income:||Beneficiaries who file joint tax returns with modified adjusted gross income:||Income-related monthly adjustment amount|
|$97,001 -$123,000||$194,001 - $246,000||12.20|
|$123,001 - $153,000||$246,001 - $306,000||31.50|
|$153,001 - $183,000||$306,001 - $366,000||50.70|
|$183,001 - $500,000||$366,001 - $750,000||70.00|
|> $500,001||> $750,001||76.40|
One final word: A sincere thank you to all our new members, and those of you who have taken action to help support our efforts in Congress. We look forward to serving you in the New Year and protecting your earned benefits!