Social Security COLA & Medicare B Premiums

[Helena]

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Big Social Security COLA will be offset by Medicare premiums


" For a retiree receiving the average monthly Social Security benefit of $1,360, a 2 percent raise would translate to an increase of $27.20. But for most beneficiaries, Medicare Part B premiums are deducted from Social Security. And the impact of the Part B premium on net benefits next year will vary due to what is known as the “hold harmless” provision governing Social Security.

By law, the dollar amount of Part B premium increases cannot exceed the dollar amount of the COLA — a feature that ensures net Social Security benefits do not fall. The hold harmless provision applies to the 70 percent of the Medicare population enrolled in both programs. Those not held harmless include anyone delaying their filing for Social Security benefits, but others affected include some federal and state government retirees. Affluent seniors who pay high-income Medicare premium surcharges also are not protected.

The stingy COLAs of the past two years are rare, and now they have set the table for an equally unusual situation for 2018.

The recent flat COLAs meant that nonprotected Medicare enrollees shouldered most of the burden of rising Part B premiums; the premiums for this group jumped sharply in 2016 and 2017. This year, they are paying $134 per month, while protected beneficiaries are paying an average of $109.

But a generous 2018 COLA will spread higher Part B program costs across the entire Medicare population. That means nonprotected enrollees will see their premiums fall, while the protected group will pay more. "

more at link

Big Social Security COLA will be offset by Medicare premiums | Business | stltoday.com

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[MichaelB]

SS COLA has not been announced, so this is possible. but for now, a guess, right?

 

[Helena]

SS COLA has not been announced, so this is possible. but for now, a guess, right?

Quite right.

Earlier I read another news article that basically said "happy days are here again" because of the projected larger COLA. But apparently the author did not realize the devil is in the details. Many are now in the "hold harmless" group and pay a reduced Medicare B premium. So whatever their COLA might be, some or all of it will go to an increased Medicare B premium.

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[Another Reader]

Here's a question from a pre-Medicare retiree. If you turn 65 in December, when does Medicare start? I assumed it was January, but I saw something about it starting the first of the month in which you turn 65. If it starts then, you would pay the increased Part B starting in January, correct? So you would lose the COLA to the Medicare Part B premium?

What this seems to mean is that you likely never get any increase in your Social Security after you start Medicare, because the COLA goes to pay the increase in the Medicare Part B premium. Is my understanding correct?

 

[Helena]

Here's a question from a pre-Medicare retiree. If you turn 65 in December, when does Medicare start? I assumed it was January, but I saw something about it starting the first of the month in which you turn 65. If it starts then, you would pay the increased Part B starting in January, correct? So you would lose the COLA to the Medicare Part B premium?

What this seems to mean is that you likely never get any increase in your Social Security after you start Medicare, because the COLA goes to pay the increase in the Medicare Part B premium. Is my understanding correct?

For most already on Medicare, their Medicare B premium can not increase more than their annual SS COLA.

As the article says, 2018 is an unusual situation because normally the SS COLA is more than any increase in Medicare B premium. But because of the low or zero COLAs the past few years, there is some catching up to do for the "hold harmless" group to pay the full Medicare B premium.

I turned 65 this year. Medicare started the first day of the month I turned 65.

In the first year you are NOT in the "hold harmless" group. So I have to pay $134 monthly, the increased Medicare B premium for this year.

As the article says, most people already on Medicare in the "hold harmless" group pay $109 premium. With a COLA, their premium will go up in 2018... and hopefully mine will go down a little.

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[Helena]

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Here is more information about the "hold harmless" provision.
It can get confusing... and the devil is in the details.

https://www.medicareinteractive.org...n-part-b-premiums-the-hold-harmless-provision

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[Helena]

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Something else to consider when delaying SS. If you are on Medicare B but not SS, you are NOT in the hold harmless group.

Those with higher incomes are not in the hold harmless group and pay more than the standard 2017 $134 monthly premium.

https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html

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[Another Reader]

Looks like MAGI as computed by the IRS is the basis for the Part B premiums. Time to dig up the tax return!

 

[Another Reader]

I know my retirement system offers Medigap through a private exchange and credits all or a portion of the cost. Hope what they offer isn't completely worthless!

 

[meierlde]

I know my retirement system offers Medigap through a private exchange and credits all or a portion of the cost. Hope what they offer isn't completely worthless!

That is independent of the part B premiums so unless they tell you it has been changed it should stay the same. In general those pay medigap and part D premiums and/or any medicare advantage premiums over the standard part B premiums.

 

[Another Reader]

That is independent of the part B premiums so unless they tell you it has been changed it should stay the same. In general those pay medigap and part D premiums and/or any medicare advantage premiums over the standard part B premiums.

Yes, but the Medigap looks like it costs as much or more than Part B.

When I handled my father's paperwork, he had the AARP United Health Care Medigap policy. It was considered the gold standard at that time. Our choices for pre-Medicare retiree plans are the witch doctors of Kaiser and an HMO and a PPO through United Healthcare. Zero problems with this company so far.

 

[meierlde]

Yes, but the Medigap looks like it costs as much or more than Part B.

When I handled my father's paperwork, he had the AARP United Health Care Medigap policy. It was considered the gold standard at that time. Our choices for pre-Medicare retiree plans are the witch doctors of Kaiser and an HMO and a PPO through United Healthcare. Zero problems with this company so far.

That depends on which of the letter medigap plans you pick, High deductable F tends to run about 60/month (2500 or so deductable)

 

[Another Reader]

If I'm not paying for it, I'm going for the most comprehensive policy with the best available company through their private exchange. If they are uniformly terrible, I will buy outside their exchange and eat the cost. The cost of these policies is relatively low anyway. The AARP policy premiums are not priced by age or medical underwriting status here per the Medicare website chart. The others are. My guess is that this policy will be the preferred solution, barring an equal or better option through the private exchange.

 

[ABQ2015]

Fedsmith had an article today that the best estimate for the 2018 COLA for SS (and the CSRS retirees) is 2.2%. But there was a second article concerning lowering the the income thresholds for Medicare Part B premiums:

https://www.fedsmith.com/2017/08/10/medicare-beneficiaries-see-higher-premiums-2018/

"Not that long ago, I wrote an article about IRMA, income related monthly adjustments, which increase the Medicare Part B premium for higher income Medicare beneficiaries. Though the new Medicare Part B premiums will not be set until at least October, the levels at which higher premiums kick in have been lowered in all but the first two tiers.

This change was made as part of the “Medicare Access and CHIP Reauthorization Act”, which eliminated the annual battle over reimbursements made to physicians."

The first higher premium tier (e.g., $85K-$107K for singles) has not changed but the next tier has lowered thresholds:

2017 $107-160K $214-320K
2018 $107-133.5K $214-267K

Interesting how these thresholds never get increased with inflation, just decreased. Of course we will have to wait to see how the higher SS COLA impacts the premiums.

 

[Amethyst]

Even though I only work part-time, and my salary is well below the Medicare cut-off, I still get docked for Medicare...because they base it on what my salary *would* be if I worked full-time.

Gotta pay for old folks somehow!

 

[braumeister]

Fedsmith had an article today that the best estimate for the 2018 COLA for SS (and the CSRS retirees) is 2.2%.

That is extremely optimistic.

See here:

 

[Travelfreek]

Today's news is that cpi-w was lower than expected (1.7%) but no one will know till October 13th when the September stats are announced.

 

[Independent]

Quite right.

Earlier I read another news article that basically said "happy days are here again" because of the projected larger COLA. But apparently the author did not realize the devil is in the details..

I know this is a tangent to this thread, but I'll say it anyway ....

The author is wrong, a higher SS COLA does not mean "happy days are here again".

It means the CPI-W went up, which means we're already paying more for stuff, and our SS checks are just catching up. That's neutral news.

But, if we have fixed bonds, then the value of our principal and coupons went down. SS doesn't offset that, it's just a loss.

And, if we have non-COLA'd pensions, the value of our pensions went down. SS doesn't offset that, either, it's just another loss.

I'd prefer 0% SS COLAs for all my retirement years.

 

[mathjak107]

the reality the cpi's and our personal cost of living have little in common .

the cpi is only a price change index .

our personal cost of living is comprised of that price change on only the stuff we use x how many times we personally use it with some quality factor included . better quality goods see greater price increases but can last a lot longer .


here in nyc more than half of all rentals saw no rent increases in two years for millions of people . the apartments are stabilized . that is a lot different than what others are seeing .

many older retirees no longer do or buy what they used to so a good portion of price increases in what they still use is offset by what they don't .

so don't get to wrapped up in this thought that somehow the cola increases will match your personal rate of inflation . the cpi reflects the changes in prices of goods and services in the 1500 mini economies that make up this country but they do not reflect anyone in particular .

 

[mathjak107]

2018 will see larger premium increases at lower incomes than 2017 had .

 

[braumeister]

Note that the chart above is for single filers. Thresholds are higher for joint.

 

[mathjak107]

correct .

the real issue for most of us is not a yearly income like those higher ranges . it is generally going to be a one time capital gain somewhere that triggers that level.

we had a sale in 2014 of an asset that triggered it for us in 2016 .

 

[Independent]

the reality the cpi's and our personal cost of living have little in common .

the cpi is only a price change index .

our personal cost of living is comprised of that price change on only the stuff we use x how many times we personally use it with some quality factor included . better quality goods see greater price increases but can last a lot longer .


here in nyc more than half of all rentals saw no rent increases in two years for millions of people . the apartments are stabilized . that is a lot different than what others are seeing .

many older retirees no longer do or buy what they used to so a good portion of price increases in what they still use is offset by what they don't .

so don't get to wrapped up in this thought that somehow the cola increases will match your personal rate of inflation . the cpi reflects the changes in prices of goods and services in the 1500 mini economies that make up this country but they do not reflect anyone in particular .

That's all correct.

If I thought that the CPI-W was loaded with things I don't buy, then I could enjoy SS COLA increases without worrying that the purchasing power of my bonds and pension were being eroded.

The BLS has developed a CPI that is weighted for things they think retirees buy https://www.bls.gov/opub/ted/2012/ted_20120302.htm , it hasn't drifted far off the CPI-W. So I don't see the "average" retiree winning that game.

Personally, I see medical expenses becoming a bigger share of our budget. I'm not optimistic that we'll be on the good side of this, either.