Social Security Gives-Medicare Takes It Away?

That’s similar to the title of a news story on Kaiser Health News  Social Security Giveth, Medical Costs Taketh Away,  reporting on the amount of Social Security is spent by beneficiaries on out of pocket hospital costs. On Friday SSA announced its 2018 figures, including the COLA increase.  However, Medicare’s 2018 premium amounts haven’t yet been announced, but speculation is that the premium raises will wipe out the COLA increase. The Washington Post reported Social Security checks to rise 2 percent in 2018, the biggest increase in years reports a 2% increase in Social Security for 2018 and noted that “[h]ealth care is their biggest expense, and it’s one of the fastest rising costs in America. Medicare Part B premiums are expected to rise in 2018, eating up much of the Social Security increase for some seniors.”  Forbes reported similarly in its article, Gotcha! Social Security Benefits Rising 2% In 2018, But Most Retirees Won’t See Extra Cash, “many recipients will find most or all of that increase eaten up by a jump in the Medicare Part B premiums deducted from their monthly Social Security checks….”

The Forbes article explains why beneficiaries won’t really come out ahead with the COLA increase.

By law, normal Part B premiums are supposed to cover 25% of Medicare’s costs for providing doctor and outpatient services.  But about 70% of Social Security recipients have been protected in the past two years by a “hold harmless” provision which provides no increase in Medicare premiums can reduce a Social Security recipient’s net monthly check below what it was in the previous year. (Recipients who are considered “high income” and those who don’t have their premiums deducted from Social Security aren’t protected by this hold harmless provision.) Since retirees got no Social Security increase in 2016 and a measly 0.3% hike in 2017, the 70% are now paying an average of $109 a month, instead of the $134 per month premium that would be needed to cover 25% of costs.

While Medicare Part B premiums for 2018 haven’t yet been announced, they’re expected to remain at around $134—-meaning the 70% will see about $25 per person—or $50 per couple—of any Social Security benefits increase consumed by higher Medicare premiums.

With open enrollment starting, expect the 2018 premiums to be announced.