What Is the Medicare Hold Harmless Provision?
The Medicare hold harmless provision prohibits Medicare Part B premiums from reducing the amount of your Social Security benefits year over year. This limits the rise in Medicare Part B premiums paid by Social Security beneficiaries in a given year to no more than the cost of living increase provided by Social Security. The hold harmless provision limits the financial strain certain Social Security recipients may experience if Medicare costs rise.
- The Medicare hold harmless provision prevents a recipient's Social Security benefits from being reduced due to Medicare Part B premiums.
- People who pay Part B premiums directly to Medicare—or who have premiums paid by Medicaid—do not qualify for the hold harmless provision.
- To qualify, recipients must receive Social Security benefits and have their Medicare Part B premiums paid by those benefits for a minimum of two months in the previous calendar year.
Understanding the Medicare Hold Harmless Provision
The Medicare hold harmless provision stems from a statutory restriction that prevents Medicare from raising most Social Security recipients’ Medicare Part B premiums by more than the cost of living adjustment (COLA) provided by Social Security in a given year. The administration calculated the adjustment for 2022 at 5.9% (up from 1.3% in 2021).
Every year, the Centers for Medicare and Medicaid Services (CMS) must establish a standard premium for Medicare Part B insurance.
The standard monthly premium for Medicare Part B is $148.50 for 2021 and $170.10 for 2022. The annual deductible is $203 for 2021 and $233 for 2022.
By law, Medicare must collect a portion of its Part B expenses from beneficiaries. Low COLA increases can put the calculation of the standard premium in tension with the hold harmless provision because it affects the majority of Part B enrollees. This can place an increased burden on those who are exempt from the hold harmless provision.
Requirements for the Hold Harmless Provision
The majority of enrollees in Medicare Part B are covered by the hold harmless provision. To qualify for reduced payments under this provision, you must receive Social Security benefits and have Part B premiums paid out of those benefits for at least two months in the previous year.
Those who make payments for Part B insurance directly to Medicare and those who have premiums paid by Medicaid do not qualify and, as a result, may be subject to higher premiums.
Income-Related Monthly Adjustments
The remaining Medicare Part B enrollees are those who report modified adjusted gross income (MAGI) over a certain amount. Individuals with a MAGI above $91,000 in 2022, up from $88,000 in 2021, must pay income-related monthly adjustment amounts (IRMAAs) that raise their monthly premiums above the established standard.
Also, married couples filing jointly with a MAGI of more than $182,000 in 2022, increased from $176,000 in 2021, must pay an income-related monthly adjustment amount in addition to the standard monthly premium.
Examples of Income-Related Monthly Adjustments
For example, in 2021, single beneficiaries with a MAGI of more than $88,000 but less than $111,000 pay a monthly adjustment amount of $59.40. The monthly adjustment amount for single filers who make $500,000 or more is $356.40 for 2021.
In 2022, single beneficiaries who earn more than $91,000 but less than or equal to $114,000 will pay an extra $68 monthly adjustment, in addition to the standard premium of $170.10, bringing their total premium to $238.10 per month. Single filers who earn equal or more than $500,000 will pay an extra $408.20 per month, bringing their total premium to $578.30 per month.
Your premium depends on your MAGI as reported on your federal tax return from two years ago. For example, you would use your 2019 income to determine your 2021 premiums.
Another unintended consequence of the hold harmless provision occurs when the COLA moves from near zero to higher numbers. Social Security adjusts the COLA in response to changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In theory, this means rises in Social Security benefits should cover increased prices for goods and services.
In years when the COLA falls to zero, as it did in 2015, the Medicare hold harmless provision forces Medicare to charge proportionally higher premiums to those ineligible for the provision’s protection. When the COLA rises again, nothing keeps Medicare Part B premiums from rising in tandem.
In 2018, for example, Medicare estimated that 42% of enrollees subject to the provision would pay the full premium as increases to their benefits from the rising COLA covered the cost, wiping out some or all of the increased income they would otherwise have received.
How Much Will My Medicare Costs Increase Each Year?
If an individual is paying for Medicare Part B costs with their Social Security savings, the cost will only increase at a rate based on the cost of living. For 2022, it is estimated that this cost increase will be 5.9%, a notable increase from 1.3% in 2021.
How Can I Qualify for the Hold Harmless Provision?
In order to qualify, individuals must have paid for their Medicare Part B costs with their Social Security savings for at least two months. If an individual pays Medicare directly, they do not qualify.
Will My Medicare Premiums Drain My Social Security Savings?
The Medicare hold harmless provision is in place to protect your Social Security savings. While the cost of Medicare Part B will increase with time, if an individual is paying for it with Social Security, the cost will only increase based on a predetermined cost-of-living adjustment. For 2022, this cost is estimated to increase to 5.9%.