Next year will be a banner year for Social Security recipients. In previous years, those receiving Social Security had either a minuscule or no Cost of Living Adjustments (COLA). In 2017, the COLA increase was 0.3%, but 2018 will see a COLA increase of 2%. Additionally, the standard Medicare Part B (out patient care) premium stays the same at $134 a month in 2018.

So, what does Social Security have to do with Medicare? A lot.

Medicare “Hold Harmless”

If your Medicare Part B premiums are automatically deducted from your monthly Social Security payments, there is something called a “hold harmless” provision that ensures annual increases in Medicare payments aren’t higher than the Social Security COLA increase. For example, if Medicare Part B increases 7%, but Social Security COLA increase is only 1%, you will only have your Medicare Part B premium increase 1%. If you don’t have automatic deductions, you’re aren’t protected under the “hold harmless” provision. Pretty sweet, right?

Well, not so fast. It seems the metaphorical rooster has come home to roost. About 70% of Medicare participants have been able to keep their monthly payment below the standard Part B premium of $134 because the Social Security COLA increases have been small. Now with the Social Security COLA increase at 2%, many Medicare participants will see a lot, if not all, of their Social Security increase go to Medicare Part B premiums. You see, even though Medicare standard premium won’t change in 2018, if your current monthly Part B payment is under the standard premium, your Medicare Part B can still increase by the Social Security COLA amount up to the Medicare Part B standard premium of $134. This affects 42% of Medicare beneficiaries who will see their monthly premium go from $109 to $134 a month — a 23% increase. The remaining 28% will still see an increase, but remain below the standard $134 premium.

But, not everyone…

If you were not part of “hold harmless” or already at the standard $134 premium, you likely will not see any increase. Why? Because you’ve already bore the brunt of the increase in past years. Note, higher income beneficiaries might pay an additional amount.

If you’re wondering what other options exist, you can consider Medicare Advantage (also called Part C) — Medicare from private companies. There are a lot of good, and not so good, things about Medicare Advantage, but one possibility is lower premiums or coverage of out-of-pocket expenses with a potential trade-off in benefits, such as a narrower network of health providers. You can find out more here at the official U.S. Medicare website.

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