CRS report discusses what will happen to Medicare Part B without SS COLA premium increase
Currentprojections indicate that there will be no Social Securitycost-of-living adjustment (COLA) in 2010, 2011, and 2012. Over the sameperiod, total Medicare Part B program costs are expected to increase.Part B premiums, which are automatically deducted from Social Securitychecks, must cover 25% of projected Part B costs. The Social SecurityAct includes a provision that holds most Social Security beneficiariesharmless for increases in the Medicare Part B premium. Affectedbeneficiaries Part B premiums are reduced to ensure that their SocialSecurity checks do not decline from one year to the next. In a typicalyear, the hold harmless provision affects a small fraction ofbeneficiaries and has a limited impact on program finances. However, ina scenario where Medicare Part B premiums increase but Social Securitybenefits do not, the effects of the hold harmless provision are largerand more complex. If there is no Social Security COLA, Medicare Part Bpremiums would be affected in two ways. For about three-quarters ofPart B participants, the hold harmless provision would prevent theirPart B premiums from increasing, and so their Social Security checkswould remain flat. For the other one-quarter of beneficiaries, the holdharmless provision would not apply. These beneficiaries would shoulderthe entire beneficiary share of the increase in Part B costs. In otherwords, their collective premium increase would be nearly four timesgreater than if there were no hold harmless provision. There are threegroups of beneficiaries to whom the hold-harmless provision would notapply: low-income beneficiaries whose Part B premiums are paid by theMedicaid program (currently 17% to 18% of beneficiaries, expected toincrease), high-income beneficiaries who are subject to income-relatedPart B premiums (about 5% of beneficiaries), and new enrollees (about2% of beneficiaries). The substantial majority of those not heldharmless are low income beneficiaries whose Part B premiums are paid byMedicaid. As a result, in the absence of any intervention by Congress,most of the cost of the increase in Part B premiums in 2010, 2011, and2012 would be paid by the federal-state Medicaid program, not directlyby beneficiaries. In the absence of a Social Security COLA, unless PartB premiums are increased substantially on those who are not heldharmless, the Supplementary Medical Insurance trust fund, whichfinances Part B, is at risk of exhaustion.