Medicare’s Hold Harmless Act
Medicare’s Hold Harmless Act is a provision that states no retiree who enrolls into Social Security and into Medicare can have their Medicare Part B premiums decrease their Social Security benefit in any given year.
The Hold Harmless Act was created in 1988 through the Medicare Catastrophic Coverage Act to help offset the regulation that mandates that Social Security benefits pay for Medicare Part B premiums automatically.
In order to see how the Hold Harmless Act works all one needs to do is look at the past 4 years.
- 2015: Medicare Part B premiums were $104.90 a month.
- 2016: Medicare Part B premiums inflated by 16.11 percent while Social Security did NOT release a COLA for that year.
The result: Medicare Part B premiums rose to $121.80 a month, but due to the Hold Harmless Act every retiree was “held harmless”. Meaning their Part B premiums stayed at $104.90 a month and their Social Security benefit remained at the same.
- 2017: Medicare Part B premiums inflated by 10 percent making that premium total $134.00 a month while Social Security’s COLA was 0.3 percent or $5.00 on average a month.
The result: Again, the Hold Harmless Act was implemented, and every retiree realized only a $5.00 a month increase in their Medicare Part B premiums while their Social Security benefit remained the same again for a 3rd consecutive year.
- 2018: Medicare did not have an increase in Part B premiums while Social Security released a 2.0 percent COLA or roughly $5.00 a month increase for the average Social Security recipient.
The result: Retirees who were Held Harmless in 2017 realized an increase in Medicare Part B premiums to $134.00 a month while their Social Security COLA was consumed by as much as 88 percent.
The Hold Harmless Act, for the past 4 years, has worked flawlessly for many retirees. Due to its construction the majority of retirees realized a Medicare premium that remained almost constant even though their Social Security benefit never increased.
Here is a chart breaking down the last 4 years:
Medicare Part B Social Security COLA Avg. Social Security Increase Avg. Retiree’s Medicare Premium Difference Medicare premium to Social Security benefit 2015 $104.90 $104.90 2016 $121.80 0.00% $0.00 $104.90 $0.00 2017 $134.00 0.30% $5.00 $109.90 ($24.10) 2018 $134.00 2.00% $27.38 $134.00 $3.28
The problem, though, is that the Hold Harmless Act is NOT for everyone.
In 2009 Congress, through the “Medicare Premium Fairness Act”, revamped the Hold Harmless Act to exclude retirees who happened to fall into Medicare’s Income Related Monthly Adjustment Amount (IRMAA).
IRMAA applies to people with higher incomes who are enrolled in Part B and/or covered under a Medicare Part D Prescription Drug Plan. If they happened to be earning too much income in retirement they will be assessed a surcharge on top of those premiums.
The result: Any retiree who happened to earn too much income in retirement realized a loss in Social Security income in 2016 and 2017.
Their one advantage for them though is that in 2018, since they were already at the 2017 Medicare Part B premium of $134.00 a month, their Social Security benefit did increase.