The Social Security Administration recently announced that the annual cost-of-living adjustment (COLA) will raise benefits by 2.8% for 2019. The average retirement benefit of $1,400 will increase by $39.20 per month, to $1,439.20. The Medicare Part B premium increase for 2019 will be $135.50 per month — just $1.50 per month more than the $134 in 2018. The COLA, the highest in 7 years, and a low Medicare Part B premium increase, should mean most retirees can finally expect a modest boost in net Social Security benefits.
But 2 million retirees receiving Social Security benefits of less than $600 per month in 2018, won’t see an increase after the deduction for their Medicare Part B premiums. Part B premiums will increase by more than $1.50, for this group of retirees because they are paying less than the current Part B premium of $134 today. This is due to the effects of the Social Security “hold harmless” provision.
Recently we heard from Barbara B. of Indiana who was affected in a similar way last year, but who will finally catch up in 2019. Barbara’s net Social Security benefit, after deduction for Part B premium, has remained exactly the same for the past three years. She hasn’t seen an increase in her benefits since 2015, despite a 2% cost-of-living adjustment (COLA) in 2018.
The Social Security hold harmless provision prevents reductions in net Social Security benefits, when the dollar amount of an individual’s Medicare Part B increase is greater than the dollar amount of their COLA. In 2019, Barbara may finally see a small boost of about $19 per month after the deduction for her Part B premiums.
Here’s how we got here: The hold harmless provision was triggered nationally in 2016 when the Social Security Administration announced that there would be no COLA payable, due to a drop in inflation. Barbara’s Medicare Part B premium stayed the same as it was the year before, at $104.90, even though Medicare Part B premiums in 2016 jumped to $121.80 for about 30% of beneficiaries, such as new enrollees who were not protected by the hold harmless provision.
In 2017, the COLA was almost zero again, just 0.3%. The Medicare Part B premium rose to $134 for people not protected by hold harmless. Again the Part B premium of Barbara and the majority of Social Security recipients was adjusted. Barbara’s monthly Medicare premium was adjusted to $108, taking every penny of her tiny COLA boost.
In 2018, the Part B premium remained $134 per month. To cover that premium, Barbara, whose Part B premium was $108.00, needed a COLA of at least $26.00. That was more than the 2% COLA boosted her Social Security benefits. Once again her Part B premium was adjusted and in 2018 she pays a Part B premium of $127.00 per month. In 2019 her COLA will be high enough to catch up to the Part B premium of $135.50 and still leave a small boost for her net Social Security benefits.
As much as the protection against reduction of Social Security benefits is appreciated, Barbara has been frustrated about high Medicare premium costs after years of low or no COLA growth. “It’s been 36 months since I’ve had any raise in my net operating Social Security, but my actual household costs continue to go up,” Barbara told us. “This isn’t fair to retirees,” she adds.
TSCL supports legislation that would strengthen the COLA three ways:
- Use a consumer price index that better reflects the costs of retirees — the Consumer Price Index for the Elderly (CPI-E).
- Provide a modest boost in monthly benefits to retirees to make up for years when no COLA, or only a negligible COLA, was payable.
- Guarantee a minimum COLA of no less than 3 percent.
To learn how you can get involved visit www.SeniorsLeague.org.