Definition and Example of Medicare Hold-Harmless Provision
The Medicare hold-harmless provision ensures that you don’t receive lower Social Security payments because your Social Security cost-of-living adjustment was lower than the increase in Medicare Part B premiums.
- Alternate name: Variable supplementary medical insurance premium
Say the Medicare Part B premium rises from $225 one year to $250 the next year. The SSA announces it won’t increase the Social Security COLA in the upcoming year, which means that the Part B premium increase is bigger than your COLA. Because of that imbalance, there’s a good chance you’ll be eligible for the hold-harmless provision if you can meet certain income requirements.
How Does the Medicare Hold-Harmless Provision Work?
In a typical year, you can expect to see an annual increase in your monthly Social Security checks due to a cost-of-living adjustment. However, there might be an increase in the cost of your Medicare Part B insurance premiums, too.
The reason for the Part B increase? As health care costs rise, so do Medicare premiums. Medicare premiums are calculated so that the payments coming in will cover 25% of what it costs the federal government to run the program. If the cost of health care services goes up, then it costs the government more to run Medicare, which means Medicare Part B premiums are likely to go up.
In some cases, your Medicare Part B premium increase is higher than your Social Security COLA. In this case, your cost-of-living-adjustment wouldn’t be enough to cover the standard Medicare Part B increase in premiums.
That’s where the Medicare hold-harmless provision comes into play. If paying the Part B standard premium amount would cause a decrease in your Social Security check, the provision adjusts your Medicare Part B payments via a variable supplementary medical insurance premium so your Social Security payments aren’t affected. Those who are eligible for the hold-harmless provision will see no change or a slight increase to their Part B premium.
The Social Security Administration calculated the cost-of-living-adjustment for 2022 at 5.9%, which increased from 1.3% in 2021.
Exceptions to the Hold-Harmless Provision
The Medicare hold-harmless provision does not protect all Social Security recipients. A few examples of groups that are not protected include:
- High-income beneficiaries. Some Medicare beneficiaries with higher incomes are not eligible for the hold-harmless provision and may be required to pay the full amount of their Part B premium increases. For 2022, individuals who earn more than $91,000 and joint filers who earn more than $182,000 are not eligible for hold-harmless protection.
- Low-income beneficiaries. The hold-harmless provision does not protect lower-income recipients on Medicaid. Typically, their premiums are paid by Medicaid and not deducted from their Social Security benefits.
- People who do not receive Social Security. The people in this group include those who have not signed up for Social Security for varying reasons, such as they have not reached full retirement age, are still employed, or are government workers, such as teachers and law enforcement, who have their own pension programs.
- People who did not have end- or beginning-of-the-year premiums deducted from their Social Security checks. This group includes people who enrolled in Social Security or Medicare during the year in which the hold-harmless provision is in effect. It also includes people whose Medicare premiums were paid on their behalf for one year—for example, premiums paid by Medicaid, even though they may have lost that coverage during the following year.
Here’s how this works based on the 2022 increases in Medicare Part B premiums and the Social Security COLA. Say that your Part B premium increases 3.5% and your COLA increases 5.5%. In this case, the hold-harmless provision would likely not apply to you because the COLA increase was greater than the Part B premium increase.
However, if those numbers were flipped and the Part B premium increase was greater than the COLA, then you’d likely receive hold-harmless protection.
Requirements for Medicare Hold-Harmless Provision
To qualify for the Medicare hold-harmless provision in a given year, you must have received a Social Security benefit check in December of the previous year and January of the current year. Additionally, Part B premiums must have been deducted from both checks.
The Medicare hold-harmless provision compares the net dollar amounts of both monthly payments. If your net Social Security benefit during January turns out to be a lower dollar amount than you received in December, the hold-harmless provision will apply.
- The Medicare hold-harmless provision is a special rule designed to protect retirees’ Social Security checks from rising Medicare Part B costs.
- If Medicare Part B premiums rise higher than the cost-of-living-adjustment, the recipient's premium cost will be reduced instead of their Social Security benefit checks.
- There are certain circumstances where people are not protected by the Medicare hold-harmless provision and could pay the full Medicare premium increase.
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