Paying Different Medicare Premiums than Other People in Certain Years

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It has happened rarely — so far only in 2010, 2011, 2016, and 2017 — but there are certain years when about 70 percent of Medicare beneficiaries pay one Part B premium and the remaining 30 percent pay much more. This is the direct result of Social Security not providing a cost-of-living adjustment (COLA) — that is, an increase — or only a very tiny one, during some years.

Under the law, people who receive Social Security benefits are protected from having those payments cut due to increased Part B premiums. So if there is no Social Security COLA in a given year, but the Part B premium is increased in that year, those people are "held harmless" — meaning that the increase is waived and they do not have to pay higher premiums than they did the previous year, which sounds only fair.

However, under another long-established law, Part B premiums must be set to cover about 25 percent of expected costs in the program for the coming year. When costs rise, premiums go up. But if the people who are held harmless cannot contribute to that increase, who pays? The answer is this: everybody else in Medicare. They include

• Those who do not receive Social Security or Railroad Retirement benefits: These include people who have not yet applied for benefits; former federal, state, or local government workers who have their own pension systems; and people under age 65 whose disability benefits have been discontinued because they returned to work, but still qualify for Medicare.
• Those who are new to Medicare, even if they do receive Social Security benefits: You must have received benefits in November and December and had Medicare premiums deducted from them (in advance) for the months of December and January to be held harmless during the rest of the year.
• All those who pay the higher income-related premiums, regardless of whether they receive Social Security payments: Refer to the earlier section "Paying Higher-Income Premiums" for more info on whom this applies to.
• Lower-income beneficiaries who receive Medicaid or whose Part B premiums are paid by their state: But in this case, it is the state that pays the increased premium, not the beneficiary.

The result of this situation in 2010 and 2011 was that most beneficiaries were held harmless and paid Part B premiums at the standard 2009 rate of $96.40. The premiums of those not held harmless were $110.50 in 2010 and $115.40 in 2011 — a large difference. But in 2012 (a year when the Social Security COLA was restored), everyone paid the same standard premium of $104.90. Similarly, in 2016, those held harmless paid $104.90 a month, whereas the standard premium for everyone else was $121.80. In 2017, when the COLA was a measly 0.3 percent, the standard premium remained at a few dollars above that amount (depending on a person's individual COLA increase) for people held harmless but went up to a record $134 for everyone else.

The Social Security COLA is always pegged to the Consumer Price Index, a measure that shows overall inflation in consumer prices. In 2010, 2011, and 2016, the CPI reflected zero or negative inflation mainly because of falls in the cost of oil. However, the CPI does not include health-care costs, which are a big slice of everyday expenses for Americans, especially those in the Medicare age bracket.