Congress Rolls Back Medicare Part B Increase of 52%, But No Emergency COLA

Congress Rolls Back Medicare Part B Increase of 52%, But No Emergency COLA

The recent battle in Congress over lifting the debt limit contained mostly good news and some not so good news, for disabled and retired Americans. The legislation rolled back an unprecedented 52% spike in Medicare Part B premiums due to affect about 15.6 million Medicare recipients, and it prevented a 19% cut in Social Security Disability Insurance benefits due to occur later this year. But the legislation contained no Cost-of-Living Adjustment (COLA) relief for 2016, and closed off one of the few claiming strategies that some Americans have to boost their Social Security payouts.

While about 70% of Medicare beneficiaries will see no Medicare Part B increase in premiums this year, the legislation reduced monthly Part B premiums for the 30% of beneficiaries who faced the jump of 52%. That group, who are not protected by the Social Security “hold harmless” provision, will pay a base premium of $121.80 per month instead of an estimated $159 this year. Higher income beneficiaries who are not protected by hold harmless pay an additional surcharge on the base premium amount. The legislation also reduced an increase in the Part B deductible from a projected $223 to $166.

The hold harmless provision protects people who have their Medicare Part B premiums automatically deducted from their Social Security payments. If the Medicare Part B premium increase is greater than the amount of the COLA increase, then the Part B premium will be frozen to prevent a reduction in Social Security payments. The provision does not apply to new enrollees in 2016, people who pay their Medicare Part B premiums by check, low-income beneficiaries who have their Medicare premiums paid for by state Medicaid programs and high income people who pay premium surcharges.

The legislation prevents a 19% Social Security disability benefit cut by a short-term reallocation of payroll tax revenue in 2016 through 2018. This would be sufficient to pay benefits until 2022 and would not affect the 2034 depletion date of the Social Security retirement trust fund, according to Social Security’s Chief Actuary.

While the legislation made some changes to Social Security and did not cut benefits of any current retirees, it did end a complicated benefit claiming strategy known as “file and suspend” for people very close to retirement. Although the legislation closes an unintended “loophole,” the strategy was one of the few means married couples had to maximize their payouts. A similar provision was contained in Obama’s 2015 fiscal year budget and was estimated to cut Social Security costs by as much as $9.5 billion annually.

“While most of the provisions were supported by TSCL, we in no way support using Social Security and Medicare benefits as hostages in exchange for lifting the debt limit,” says TSCL Chairman Ed Cates.

What do you think? Take TSCL’s 2016 Senior Survey.


Sources: “Social Security Administration Actuarial Score,” HR. 1314, Stephen Goss, Social Security Administration Office of the Actuary, October 27, 2015. “Time To Close A Social Security Loophole?” Alicia H. Munnell, Market Watch, March 19, 2014.