Medicare Hold Harmless Provision

By
Julia Kagan
Julia Kagan
Full Bio

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

Learn about our editorial policies
Updated October 20, 2022
Reviewed by
Anthony Battle
Anthony Battle
Reviewed by Anthony Battle
Full Bio
Anthony Battle is a CERTIFIED FINANCIAL PLANNER™ professional. He earned the Chartered Financial Consultant® designation for advanced financial planning, the Chartered Life Underwriter® designation for advanced insurance specialization, the Accredited Financial Counselor® for Financial Counseling and both the Retirement Income Certified Professional®, and Certified Retirement Counselor designations for advance retirement planning.
Learn about our Financial Review Board
Fact checked by
Suzanne Kvilhaug
Suzanne Kvilhaug
Fact checked by Suzanne Kvilhaug
Full Bio
Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands.
Learn about our editorial policies

What Is the Medicare Hold Harmless Provision?

The Medicare hold harmless provision limits the annual rise in Medicare Part B premiums deducted from Social Security benefits to no more than the cost of living increase provided to the beneficiary in a given year. This ensures that the dollar amount of the Social Security benefits paid out after deductions does not decline from one year to the next as a result of an annual increase in the Part B premium. The hold harmless provision limits the financial strain on Social Security recipients to a degree when Medicare costs rise.

Key Takeaways

  • The Medicare hold harmless provision prevents a recipient's Social Security benefits from declining year-over-year as a result of an increase in deductions for the Medicare Part B premium.
  • People who pay Part B premiums directly to Medicare, those whose premiums are paid by Medicaid, and others subject to premium surcharges based on income do not qualify for the hold harmless provision.
  • To qualify, recipients must have Part B premiums deducted from Social Security benefits received in the December of the prior year and January of the current year.
  • The hold harmless provision compares the net amounts paid out after premium deductions, ensuring the monthly payouts in January and the remainder of the year are no lower than during the prior year.

Understanding the Medicare Hold Harmless Provision

The Medicare hold harmless provision is 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 Social Security Administration (SSA) has announced a cost of living adjustment increase of 8.7% for 2023, after a 5.9% COLA rise in 2022.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) sets the standard premium for Medicare Part B insurance annually.

The standard monthly premium for Medicare Part B is $164.90 for 2023, down from $170.10 for 2022. Since the Part B premium is set to decline year-over-year in 2023, the Medicare hold harmless provision will not apply. The annual Part B deductible is $226 for 2023, down from $233 in 2022.

By law, Medicare must collect a portion of its Part B costs from beneficiaries. Because low COLA increases may limit the share of the costs offset by the standard premium, they can impose an increased burden on the high earners not eligible for relief under the hold harmless provision.

Requirements for the Hold Harmless Provision

To qualify for protection under the Medicare hold harmless provision in a given year, you must have Part B premiums deducted from the Social Security payments you receive in the December of the prior year as well as January of the current year. The Social Security Administration ensures that the monthly payout does not decline as a result of an increase in Party B premiums for those covered by the hold harmless provision.

The provision does not apply to those who make payments for Part B insurance directly to Medicare and those who have premiums paid by Medicaid.

Income-Related Monthly Adjustments

Also not eligible for the hold harmless provision are the approximately 7% of Part B participants who pay premium surcharges knoiwn as income-related monthly adjustments because their income exceeds a threshold set by Medicare. For 2023, that group includes individuals with 2021 modified adjusted gross income (MAGI) above $97,000 and joint filers with 2021 MAGI above $194,000. The adjustments are based on income reported two years earlier.

Examples of Income-Related Monthly Adjustments

In 2022, beneficiaries with 2020 MAGI of more than $91,000 and up to $114,000 as single filers pay a monthly adjustment of $68 on top of the standard premium. The monthly adjustment for single filers who make $500,000 or more is $408.20 for 2022.

In 2023, beneficiaries who earn more than $97,000 but no more than $123,000 as single filers will pay an extra $65.90 as a monthly adjustment, in addition to the standard premium of $640.90, bringing their total premium to $230.80 per month. Single filers who earn at least $500,000 will pay an extra $395.60 per month, bringing their total monthly premium to $560.50.

Part B premium surcharges are based on modified adjusted gross income (MAGI) as reported on the beneficiary's federal tax return two years earlier. For example, the 2023 income-related monthly adjustments are based on MAGI in 2021.

Special Considerations

By law, Social Security cost of living adjustments are based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). COLAs compensate beneficiaries for the loss of purchasing power to inflation. That means COLAs are a crucial "hold harmless" safeguard in their own right.

The Medicare hold harmless provision for Part B premiums only ensures Social Security benefits don't decline in nominal terms from one year to the next for most recipients as a result of increases in the premiums deducted from their monthly benefit checks. That means higher premiums can still erode the inflation protections afforded by COLAs, leaving retirees with less disposable income. For example, while Social Security benefits paid out in 2022 received a 5.9% COLA boost, the Medicare Part B standard premium increased nearly 15% from 2021.

In years when the COLA falls to zero, as it did in 2015, the Medicare hold harmless provision shifts more of the cost-sharing burden to those ineligible for the provision’s protection.

How Much Will My Medicare Costs Increase Each Year?

The Medicare Part B standard premium, a key medical expense for beneficiaries, is set annually by the Centers for Medicare and Medicaid Services to cover 25% of the program's costs in the next year, as projected by the agency's actuaries. Since program costs and projections fluctuate, the standard Medicare Part B premium does from year to year as well. The premium fell 3.1% for 2023, after an increase of nearly 15% the prior year. In addition to premiums and deductibles, Medicare beneficiaries without Medigap coverage face out-of-pocket costs such as coinsurance and copayments.

How Can I Qualify for the Hold Harmless Provision?

In order to qualify, individuals must have their Medicare Part B premiums deducted from the Social Security payments they receive in the December of the prior year and January of the current one. Those who pay Medicare premiums directly or pay higher premiums based on income do not qualify.

Is There Any Other Help Available for Medicare Premiums?

Medicare savings programs provide financial assistance for premiums and other program costs to about 20% of Medicare beneficiaries. To qualify, you must have income below certain limits, which can vary by state.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Social Security Administration. "How the Hold Harmless Provision Protects Your Benefits."

  2. Congressional Research Service. "Medicare Part B: Enrollment and Premiums," Page 27.

  3. Social Security Administration. “Cost-of-Living Adjustment (COLA) Information.” 

  4. Medicare.gov. "What Does Medicare Cost?"

  5. Social Security Administration. "Premiums: Rules for Higher-Income Beneficiaries."

  6. Medicare.gov. “Costs.”

  7. Centers for Medicare & Medicaid Services. "2023 Medicare Parts A & B Premiums and Deductibles, 2023 Medicare Part D Income-Related Monthly Adjustment Amounts."

  8. Centers for Medicare & Medicaid Services. “2022 Medicare Parts A & B Premiums and Deductibles, 2022 Medicare Part D Income-Related Monthly Adjustment Amounts.”

  9. Centers for Medicare & Medicaid Services. "2023 Medicare Parts A & B Premiums and Deductibles, 2023 Medicare Part D Income-Related Monthly Adjustment Amounts."

  10. Medicare.gov. "Part B Costs."

  11. Social Security Administration. "Cost-of-Living Adjustments."

  12. Congressional Research Service. "Medicare Part B: Enrollment and Premiums," Page 16.

  13. Medicare.gov. "Costs."

  14. Centers for Medicare & Medicaid Services. "2021 Medicare Parts A & B Premiums and Deductibles."

  15. Medicare.gov. "Medicare Savings Programs."

Part Of
Guide to Medicare