SS COLA & Medicare B Premiums

[MichaelB]

I guess we should celebrate that there is a healthcare issue that's not blamed on the ACA!

Seriously, though, what makes this "a mess"? Medicare is subsidized, so the premium for B does not reflect the real cost. In addition, yearly increases are limited to protect the lower income beneficiaries. If we were to remove the subsidy this "hold harmless" issue would go away, but a large number of seniors would find health care unaffordable.

Health care in the US is expensive and still increasing in cost more than 2x the CPI. This problem might begin to go away when the CPI increases faster than health care inflation. That hasn't happened over the past 2 or 3 decades, so I'm not hopeful.

 

[rayvt]

I went on Medicare at 65 (as soon as possible.)

Well, you go on medicare at 65 because that's the only realistic option. If you don't, you get hit for a huge penalty for the rest of your life.

I pay quarterly premiums for MC. I am delaying SS until 70. Does all this mean that my cost of MC will suddenly jump when I take SS at 70? I would think anyone already on the MC system would be protected. Is that not the case? I would think the only difference is which pot of money the premiums come from, SS or my checking account.

Yes, that is not the case. If you don't have the MC premium deducted from your SS benefit, you are not protected by the hold-harmless clause and you have to pay a larger MC premium.
For 2016 that was $122 vs. $105. It would have been something like $145 except Congress jumped in at the last minute and made a special exemption.
Currently, the 2017 premium is predicted to be about $149.
If you don't get SS, you pay that. People who already get SS will pay about $107.

You delay to get a higher benefit at 70, but it's costing you $17/mo in 2016 and $39/mo in 2017.

That's money out of your pocket today. People already on SS don't have to pay that today. But you do.

Too late for me, anyway, but I still think I made the right decision as it was always about leaving a bigger COL protected benefit for DW after I am gone. What am I missing?

The COLA is the same whether or not you delay or start early. The thing you get by delaying is the "deferred credit", which is 8%/yr.

 

[ivinsfan]

I'm guessing that number for this years raise will be adjusted downward as well, we won't know until after the election I guess.

 

[rayvt]

Thanks REWahoo! So, what if I tried to start collecting SS asap (i.e., before end of 2016)? Any thoughts on this strategy or is it too late already?

It is already too late.

Hold harmless means that the *new* net SS check won't be smaller than the *previous* year's SS check. Since you didn't have a previous SS check, you don't qualify.

The SSA explains all this on one of their web pages.

 

[rayvt]

I don't understand this. You're paying for Medicare anyway, whether you start SS at 65 or 70. As you mention, any shortfall from hold harmless is eventually paid back by folks starting SS earlier and having the Medicare premiums deducted from their SS check. The person delaying until 70 will have been paying full Medicare premiums already out of pocket. What's the difference? Both groups are seeing the Medicare increases.

Maybe, maybe not. It is true that SSA & Medicare says that the shortfall due to the hold harmless is merely delayed and must eventually be paid back. But "eventually" may be a very long time. It may be never, and it may be not in your lifetime.

And Congress may well wipe the shortfall off the books for people who are collecting SS. Pretty soon little old widows living on their SS are going to start complaining that the COLA and inflation goes up but they don't get any more money. People who haven't started collecting will be out of luck probably, and have to pay the full boat. Just like they are now.

The spreadsheet I whipped up is an eye-opener. Assuming 0.5% COLA SS increases (this year was 0.3%) and 5% Medicare increases, the hold-harmless cap is in place until beyond 2027.
At 1% & 5%, they catch up in 2022, at which time the total shortfall is $129/mo. And then the payback of the shortfall continues until around 2030.

 

[rayvt]

This is going to be a real can of worms pretty soon now.

This year was the first year that these events happened, and people were kinda okay with not getting more money because, hey, zero COLA.

But next year! Next year people are going to be saying, "Hey, sure 0.3% is very small, but it's not zero. And the magazine & news are all saying we should get another $3-$5. But I got NOTHING. What's up with that?"

And then they are going to do a little bit of digging and find out that they are unlikely to be getting any net increase for the next several years.

 

[audreyh1]

​

I went on Medicare at 65 (as soon as possible.) I pay quarterly premiums for MC. I am delaying SS until 70. Does all this mean that my cost of MC will suddenly jump when I take SS at 70? I would think anyone already on the MC system would be protected. Is that not the case? I would think the only difference is which pot of money the premiums come from, SS or my checking account.

Too late for me, anyway, but I still think I made the right decision as it was always about leaving a bigger COL protected benefit for DW after I am gone. What am I missing?

No, it means that the year after you start drawing SS, you'll never see a decrease in you SS check due to the increasing Medicare premiums.

In other words - the jumps stop.

It all has to do with Medicare part B premiums being automatically taken out of your SS check one you start drawing SS.

For folks between 65 and 70 - those starting SS at 65 will not see Medicare premium increases eating into their SS check, as they are "held harmless", but they'll be stuck with a SS check that doesn't grow as long as Medicare increases beat SS COLA increases. People deferring SS pay for Medicare part B premiums out of pocket, so they will see the full Medicare increases until they start drawing SS.

So, it's pointed out that there may be a divergence between Medicare premiums paid by people who draw SS at 65 versus people who wait until 70, with the latter paying higher premiums - at least until the former group catch up.

When has hold harmless happened before? This is a recent phenomenon.

I guess the real problem is this:

When there is a zero or small COLA, the remaining enrollees – about 30 percent – are forced to bear the full cost burden of premium increases required for the entire program. This is because premiums are set to cover 25 percent of the costs of the program. Because premiums are limited for some, others must pick up the slack.

So it's not just the premium increase - it's that people not drawing SS must also cover the costs for the people who do draw SS. So one group is held harmless, but the other group is actually harmed, because they have to pick up the slack for the first group.

 

[gerntz]

I went on Medicare at 65 (as soon as possible.) I pay quarterly premiums for MC. I am delaying SS until 70. Does all this mean that my cost of MC will suddenly jump when I take SS at 70? I would think anyone already on the MC system would be protected. Is that not the case? I would think the only difference is which pot of money the premiums come from, SS or my checking account.

What matters is if your MAGI crosses $85K single or $170K joint no matter when or how much your SS check is.

 

[rayvt]

I guess the real problem is this:
So it's not just the premium increase - it's that people not drawing SS must also cover the costs for the people who do draw SS. So one group is held harmless, but the other group is actually harmed, because they have to pick up the slack for the first group.

Yes. Another great example of the law of unintended consequences.

Medicare recipients as a whole must pay the computed premium. But certain subclasses
[*] of recipients pay less than their proportional share, so that underpayment gets swept over to the other subclass. As you say, they pay their own share plus the amount that the 1st group doesn't pay.

It really sucks for the 30% group who gets the bill that the 70% group gets to duck.

As a little-known side note, they would have been paying around $145 in 2016, except that Congress passed a one-time special exemption that let them pay $122. Of course, that $23 underpayment wasn't written off, it was just carried over to the next year.

The problem with kicking the can down the road is that eventually you runout of road.

----------------
[*] Right now there is only one subclass that gets to underpay. But until this year, nobody realized that there even was a subclass. So it is quite possible that another year or two from now there will suddenly be more than one such subclass.
It is certainly the case that in 2017 there is not just one MC premium amount. Everybody will be paying a different amount, depending on how much 0.3% of their SS benefit is. But the 70% sub-group will have an unchanged net SS check.

 

[MichaelB]

Medicare recipients as a whole must pay the computed premium. But certain subclasses
[*] of recipients pay less than their proportional share, so that underpayment gets swept over to the other subclass. As you say, they pay their own share plus the amount that the 1st group doesn't pay.

It really sucks for the 30% group who gets the bill that the 70% group gets to duck.

This is not happening. That is to say, it did not happen in 2016. The 30% are not paying any additional premium and are not making up for the increase not paid by the other 70%.

 

[Hermit]

As with everything to do with Medicare and SS, everyone is different. I am currently drawing SS under the late DW's account and am pretty sure I will be held harmless. I wonder what will happen when I switch to my SS account at 70?

 

[gerntz]

It really sucks for the 30% group who gets the bill that the 70% group gets to duck.

Good thing is, in the long run, the original duckers die off & many of the 30% become the new duckers.

 

[Golden sunsets]

Can anyone answer this question? I am 67 and claiming spousal on DH's record. My Medicare premium is currently $104.90. My Spousal monthly check is about $857. I will switch to claiming SS on my own record at 70. I estimate that my monthly check will go to approximately $3,000/month at that time. My SS payment starting in January of 2017 will stay the same I presume as the hold harmless provision will limit my Medicare premium increase to the increase in my spousal SS check, which I am assuming will be roughly $2.50. My question is, when my SS premium jumps as I turn 70, does my Medicare premium jump to the then going rate or does the hold harmless provision protect my Medicare premium in some way.


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[MichaelB]

Can anyone answer this question? I am 67 and claiming spousal on DH's record. My Medicare premium is currently $104.90. My Spousal monthly check is about $857. I will switch to claiming SS on my own record at 70. I estimate that my monthly check will go to approximately $3,000/month at that time. My SS payment starting in January of 2017 will stay the same I presume as the hold harmless provision will limit my Medicare premium increase to the increase in my spousal SS check, which I am assuming will be roughly $2.50. My question is, when my SS premium jumps as I turn 70, does my Medicare premium jump to the then going rate or does the hold harmless provision protect my Medicare premium in some way.

My guess would be no. For hold harmless to apply, the increased Medicare premium must cause the SS pension payment to fall, and that condition isn't met when switching from the spousal record to your own.

 

[Independent]

As a little-known side note, they would have been paying around $145 in 2016, except that Congress passed a one-time special exemption that let them pay $122. Of course, that $23 underpayment wasn't written off, it was just carried over to the next year.

Yep. It seems that the premium for 2017 should start with the $145, then add on for the increase from 2016 to 2017.

I'm in this situation. I'll be watching to see what congress does.

(My wife started SS at 66, I'm deferring to 70. So we're one of those couples where one person is paying $104 and the other pays $122.)

 

[Helena]

The lowest ever? Ummm...no. It was ZERO in 2009, 2010 and 2015.

https://www.ssa.gov/oact/cola/colaseries.html

Zero years can't qualify for lowest COLA.
In those zero years there was no COLA.
You might call them the UnCOLA

.

 

[Helena]

This is not happening. That is to say, it did not happen in 2016. The 30% are not paying any additional premium and are not making up for the increase not paid by the other 70%.

Those who turned 65 this year are paying more for Medicare B coverage than most of those who turned 65 in previous years because those who turned 65 this year are not in the main "hold harmless" group until 2017. But even then they will still be paying more. Those who turn 65 in 2017 [ME!] will pay even more than the 2016 group... and on and on and on... In other words, the year you begin Medicare you are not "held harmless." Also in the 30 percent [NOT held harmless] group are those who delay SS and high earners.

The articles I first posted discuss all these special situations.

.

 

[rayvt]

Those who turned 65 this year are paying more for Medicare B coverage than most of those who turned 65 in previous years because those who turned 65 this year are not in the main "hold harmless" group until 2017. But even then they will still be paying more. Those who turn 65 in 2017 [ME!] will pay even more than the 2016 group... and on and on and on... In other words, the year you begin Medicare you are not "held harmless." Also in the 30 percent [NOT held harmless] group are those who delay SS and high earners.

The articles I first posted discuss all these special situations.

.

Just looking at the finances it is clear that both SS and Medicare are unsustainable and are headed for a big crack-up if they stay as they are. Forget the political aspect, just look at the financial aspect.

Given that, it seems silly to make plans that depend on SS & MC staying unchanged. Yet that is what delaying SS does -- makes a plan for getting an increased benfit later in return for zero benefit now. When there is a large probability of an unpredictable change you should include that possibiity in your plans.

When making plans to delay SS to get the deferred credits, nobody considered that this would require them to pay a higher Medicare premium. That cost is the direct result of deferring SS.

The obvious question is "We just got a completely unexpected cost of delaying. What *other* unexpected costs may be lurking that we aren't seeing?" Bad news never is just one item -- bad news comes in groups.



Some (not all, but some) people who decided to defer SS kinda got a holier-than-thou attitude. They figured that there was no financial risk to deferring to get the extra 8%/yr. But now we see that there was a risk. Deferring cost them $17/mo in 2016, and an unknown monthly amount in 2017 & beyond. It will probably be $40/mo in 2017.
And that's a big point -- nobody knows what this extra cost will be.

 

[Options]

...

The obvious question is "We just got a completely unexpected cost of delaying. What *other* unexpected costs may be lurking that we aren't seeing?" Bad news never is just one item -- bad news comes in groups.

Some (not all, but some) people who decided to defer SS kinda got a holier-than-thou attitude. They figured that there was no financial risk to deferring to get the extra 8%/yr. But now we see that there was a risk. Deferring cost them $17/mo in 2016, and an unknown monthly amount in 2017 & beyond. It will probably be $40/mo in 2017.
And that's a big point -- nobody knows what this extra cost will be.

I don't know that those delaying SS have a "holier than thou" attitude as much as everyone is just trying to plan the best they can. What's actionable here--and to your point that "bad news comes in groups"--is to incorporate margins of safety into whatever plan one comes up with. Given so many unknown and unknowable variables exist in retirement planning, the prudent course of action is to expect plans to go awry and plan accordingly. Otherwise known as incorporating a generous portion of "padding" into one's retirement budget.

 

[MBSC]

2017 Standard Medicare Part B Premium: $134.00

2017 Part B Deductible: $183.00

2017 Part A Deductible: $ 1316.00

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

2017 IRMAA premiums (scroll toward bottom of page): https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html