“In a bizarre twist, although the Centers for Medicare & Medicaid Services (CMS) is not raising the Medicare Part B standard premium amount in 2018, most retirees will have to cough up 23 percent higher premiums this year.”
Medicare sounds like a simple concept – if you paid into the system, you will one day qualify for Medicare to help pay your doctor and hospital bills in retirement. Social Security provides monthly checks for people who paid into the system and are retirement age. What most people do not realize is that premium increases to Medicare and cost-of-living adjustments (COLAs) to your Social Security check can have unexpected effects on each other. In fact, seniors may lose out on COLAs due to Medicare changes in 2018.
In a bizarre twist, although the Centers for Medicare & Medicaid Services (CMS) is not raising the Medicare Part B standard premium amount in 2018, most retirees will have to cough up 23 percent higher premiums this year. Wait, what? Yes, you read that correctly.
Medicare and Social Security have a “hold harmless” provision that does not allow Medicare premium increases to be higher than the COLA increase to Social Security checks for that year. This rule is because the Social Security Administration (SSA) usually takes your Medicare Part B premiums off the top of your monthly Social Security check. If your Medicare Part B premium went up more than your COLA, your check for one year could be less than the year before.
How the Hold Harmless Provision Can Wipe Out Your COLA in 2018
While the hold harmless rule sounds like a laudable protection for seniors, it will backfire on many of our elderly in 2018. Because of the harm holdless rule, about 70 percent of seniors on Medicare are paying $109 per month for Medicare Part B, (which covers outpatient health care services like doctor visits), even though the standard premium is $134. (Most Medicare recipients pay nothing for Part A coverage, which is hospitalization insurance.) With no COLA in 2016, Medicare premiums held steady. In 2017, there was a 0.3% COLA, which came to about $5 a month more in Social Security checks for most people, so Medicare premiums could only increase about $5 a month.
The SSA announced a 2% COLA for 2018, which comes to about $27 a month for the average retiree. Medicare is now allowed to raise the amount existing Medicare patients have to pay for premiums, up to the amount of the 2018 COLA. Adding the $109 monthly premium most seniors paid for Part B in 2017 to the $27 a month increase in Social Security benefits, Medicare could raise premiums up to $136 a month. So even though the standard monthly premium of $134 will not technically increase, the amount most people have to pay will spike, gobbling up all but $2 of the increased Social Security monthly check for most individuals.
The SSA bases COLAs on how much more expensive they expect standard living expenses to be in the coming year. If seniors need $27 more a month on the average to meet their increased living costs, and all but $2 of their increased monthly checks are eaten up by Medicare premiums, they will have to find a way to pay the extra $25 in costs each month, or tighten their belts even more than they already are.
Investment News. “2018 Medicare changes will erase Social Security COLAs for many.” (accessed December 13, 2017) http://www.investmentnews.com/article/20171117/FREE/171119929/2018-medicare-changes-will-erase-social-security-colas-for-many
PBS NewsHour. “Medicare announced its premiums for 2018. Here’s what you need to know.” (accessed December 13, 2017) https://www.pbs.org/newshour/economy/making-sense/medicare-announced-its-premiums-for-2018-heres-what-you-need-to-know