Social Security Freeze Impacts Part B Premium

Due to the economic downturn, Social Security recipients will likely not receive a cost of living (COLA) increase in 2010, a development with financial implications for some people with Medicare, who will be subject to higher Part B and Part D premiums.

Part B premiums are expected to rise over the next two years. However, three quarters of people with Medicare will be protected from these increases by the “hold harmless” provision of the Social Security Act. In order to mitigate the financial impact of increasing Part B costs on people with Medicare, the provision ensures that the increase in Part B premiums cannot exceed the COLA for a given year for people with Medicare who have the premium deducted from their Social Security checks. With no COLA predicted for 2010, the Part B premium will be frozen for these people.

However, premiums for the remaining 25 percent of people with Medicare—including the wealthiest, who already pay a higher Part B premium, and those with low incomes who have their premiums paid by Medicare Savings Programs—will be subject to unusually large increases over the next two years to compensate for the decrease in revenue caused by the hold harmless provision. The Part B premium for 2009 is $96.40, but the Congressional Budget Office estimates that the basic premium will rise to $119 in 2010 and $123 in 2011.

States also face an increased financial burden as a result of Part B premium increases that states will pay through Medicare Savings Programs for qualifying low-income people with Medicare. Since these premiums are not deducted from Social Security checks but paid directly by state governments, states will be subject to the higher premium. Moreover, a low-income individual who is dropped from an MSP during 2010 is not protected by the hold harmless provision and must pay the higher premium.

New Medicare enrollees will also pay the higher premium, as will currently enrolled high-income people with Medicare who now pay a higher premium based on their income.

In addition, there is no provision that protects people with Medicare from increased Part D premiums, which are also predicted to rise next year. This means that people participating in Part D might see an increase in premium expenses even while experiencing a freeze in their monthly income.

-From: “SOCIAL SECURITY FREEZE IMPACTS PART B PREMIUM”, MEDICARE WATCH, a biweekly electronic newsletter of the Medicare Rights Center, Vol. 12 , No. 10: May 19, 2009.

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