Dear Rusty: Upon reading a magazine article about the 2020 COLA increase, I thought I’d share the following: Like others, I received the 1.6% raise in my Social Security benefit. However, after their manipulations with Medicare, the net result was a reduction of $124 in my Social Security payment. I can’t afford their “raise.” I now pay double for Medicare! Signed: Disgusted
Dear Disgusted: Actually, Social Security and Medicare are two totally separate and financially independent programs, but the Social Security Administration handles enrollment and premium payments on behalf of CMS (the Centers for Medicare and Medicaid Services). For 2020, your gross Social Security benefit went up by 1.6% as a result of the Cost of Living Adjustment (COLA), but at the same time the standard Medicare Part B premium went up by $9.10 to $144.60 per month. Most Medicare beneficiaries pay the standard premium amount.
If your Medicare Part B premium is deducted from your Social Security benefit you would normally be protected by a provision known as “Hold Harmless,” which prevents your Social Security payment from decreasing as a result of an increase in the standard Medicare Part B premium. But if you have any change (other than a COLA increase) to your Social Security benefit amount, or if you pay an “IRMAA” surcharge on your Medicare Part B premium, the “hold harmless” provision doesn’t apply to you. In either of those cases your net Social Security payment could go down as a result of an increase in your Medicare Part B premium.
“IRMAA” is Medicare’s “Income Related Medicare Adjustment Amount” which is a surcharge assessed on Medicare Part B (and Part D) premiums for those with higher incomes (the surcharge varies depending upon your IRS filing status and income level). I suspect that you are suddenly subject to IRMAA because of a sudden increase in your income and the 1.6% COLA increase to your Social Security was applied to your new Medicare premium. That, however, fell short of covering your entire IRMAA Medicare premium increase and, since you’re not protected by the Hold Harmless provision, the remainder was taken from your Social Security benefit.
Most Medicare enrollees pay the standard Part B premium ($144.60 for 2020) and are protected by the hold harmless provision from a decrease in their Social Security payment. But higher earning Medicare beneficiaries are affected by IRMAA, and I believe that is what happened in your case, especially because you say you suddenly “pay double” for Medicare. This might typically happen if you took a large one-time distribution from a tax-advantage investment, or received some other form of significant, but temporary, income. The good news is that if your premium doubled because you had a temporary increase in your income in one year, the Medicare premium increase will also be temporary, and you will automatically revert back to the lower premium the following year.
Russell Gloor is an Association of Mature American Citizens certified social security advisor. To submit a question, visit amacfoundation.org/programs/social-security-advisory or email firstname.lastname@example.org.