Q & A
Ask Rusty – Hold Harmless Provision
Dear Rusty: I’m totally confused after a conversation with some friends about Social Security and Medicare. All three of us are 68, but two of my friends are already collecting Social Security while I’m waiting to apply so I can let my benefit grow. The confusion came in when we talked about Medicare and the premium for Part B. My friends both say they have their Medicare premium deducted from their Social Security payment and are paying about $114 per month. However, my Medicare Part B premium, which I pay separately, is now $134 per month. It just doesn’t seem fair. Why is their Medicare premium so much lower than mine? Signed: Confused
Dear Confused: Yes, it might seem unfair, but the difference in your Medicare Part B premiums has to do with something called the “hold harmless provision” of the Social Security Act. This provision essentially states that a beneficiary’s Social Security benefit payment cannot decrease due to an increase in Medicare’s Part B premium. This is an important provision because Medicare costs tend to rise annually often resulting in higher premiums. However to be protected by this provision, your premiums must be automatically deducted from your Social Security benefit payments. Since your friends’ Part B premiums are deducted from their Social Security, they enjoy this “hold harmless” protection; since yours is not, you pay the standard Medicare Part B monthly premium.
About 70% of all Social Security beneficiaries enjoy this hold harmless” protection, which means that the other 30% (as well as others who are on Medicare but not collecting Social Security) bear the brunt of covering the total costs of the Federal Medicare program. Since your premium is $134 you are paying the “standard” premium which applies to anyone earning $85,000 per year or less. You may take some comfort in knowing that higher-earners can pay up to $428.60 per month for Medicare Part B coverage (these are 2017 numbers). When you eventually apply for your Social Security benefits and have your Medicare premiums deducted from your payments, you will automatically become protected against significant future Part B premium increases, because the hold harmless provision will prevent your Social Security benefit amount from going down. As a side note for awareness, it sometimes happens that when a Social Security Cost of Living Adjustment (COLA) is given, it is partially or entirely offset by an increase in the Medicare premium. So, even with hold harmless protection, while your Medicare premium may technically go up somewhat, your Social Security payment will remain the same.
A couple points of information: Any time you switch from one Social Security benefit type to another (e.g., from your own benefit to spousal benefits, from survivor’s benefit to your own benefit, from spousal benefit to your own benefit, etc.), you are subject to your Medicare Part B premium amount being adjusted (increased) to the most current standard Part B premium amount. Note too that those who are subject to the Income-Related Medicare Adjustment Amount (IRMAA) are not protected by the “hold harmless” provision. In either of these cases, a reduction in the monthly Social Security payment amount might occur from one year to the next.