Medicare Part B premiums are automatically deducted from Social Security benefits, and older households are frequently surprised at how much rising Medicare premiums can take out of those monthly payments. TSCL estimates that the deduction for rising Part B premiums in 2020 is likely to leave at least a little something left over, for most retirees, but that won’t be the case for roughly 1.4 million with the lowest benefits.
According to the most recent Medicare Trustees Report, Medicare Part B premiums for 2020 are expected to rise $8.80 from $135.50 to $144.30 in 2020. If premiums rise by that much, and if the cost-of-living adjustment (COLA) is 1.6% as we estimate, then Social Security recipients with benefits of about $550 or less are at risk of seeing the Part B premiums take their entire COLA, leaving nothing extra to deal with other rising costs.
When an individual’s Part B premium rises more than the dollar amount of their COLA, that doesn’t necessarily mean that Social Security benefits will be reduced. Due to a special provision of law known as the Social Security “hold harmless” provision, the Medicare Part B premium is adjusted to prevent a reduction in Social Security benefits from December of the previous year. But the provision only applies to about 70% of all Medicare beneficiaries. Those who are not protected include people whose overall income is so low, that their Medicare Part B premium is paid by state Medicaid programs, and individuals with incomes above $85,000 or married couples with incomes of $175,000.
If you receive a low benefit and think you might be affected by hold harmless, please send us an email and let us know! TSCL supports legislation that would provide a more fair COLA by tying the annual increase to the Consumer Price Index for the Elderly (CPI-E). In most years this index tends to grow slightly faster than the CPI currently used to determine the COLA.