A recent article in Kiplinger’s, “Medicare Part B Premiums Rise for Some,” discusses how as the result of the “hold-harmless” provision, some beneficiaries will find themselves paying more for Part B, while for others, the Part B premium will remain at $134 a month.
In 2017, the “hold-harmless” provision had a positive effect for most beneficiaries. For those whose Medicare premiums are automatically deducted from Social Security, the rule restricts premiums from going up more than the amount added to benefits by the annual cost-of-living adjustment (COLA). In years when there is no Social Security COLA or a small COLA, like last year’s 0.3%, Medicare premiums are restricted. Although the standard Part B premium for 2017 was $134 a month, the miniscule COLA resulted in many people continuing to pay $109 a month.
However, inflation in 2017 meant that there was a 2% COLA for 2018. Although that might not look like much, for about 42% of beneficiaries, it is enough to allow Medicare premiums to rise to $134. The hold-harmless clause will continue to impact 28% of beneficiaries in 2018. For people with lower Social Security benefit amounts, the 2% COLA is not enough to bring their Part B premiums up to $134, so they’ll pay less than the standard amount.
Those who do not fall under the hold-harmless provision, like people who don’t deduct their Medicare premiums from their Social Security benefits or new Medicare enrollees, will pay the standard $134 a month.
People of high income aren’t protected by the hold-harmless rule. They’ll pay premiums much higher than the standard amount, up to about $429—just for Part B. They also face a surcharge as high as about $75 a month on Part D premiums. The surcharges for Parts B and D start when adjusted gross income plus tax-exempt interest is more than $85,000 if single or $170,000 for married couples filing jointly.
While the premium surcharge amounts for Part B remain static in 2018 (and are slightly lower for Part D), the income thresholds in the three highest tiers decrease. This means some with high income will pay more.
If you’re looking at an income-related surcharge, see if you qualify for relief. The government determines who owes surcharges by examining tax returns from two years ago. Thus, 2018 surcharges are based on income reported on 2016 returns.
What many people don’t know is that if there has been a major event in your life, like divorce, retirement or the death of a spouse, you have the option to ask for relief. If you qualify, your income from a more recent tax year will be used to determine whether or not you need to pay the increased cost.
For more information on how the hold-harmless provision may or may not affect you, visit our website to schedule your consultation today!
Reference: Kiplinger (January 2018) “Medicare Part B Premiums Rise for Some”