Hold Harmless Rule Protects Social Security From Medicare Premium Increases

The federal government has a special rule for Social Security recipients, called the "hold harmless rule," that protects Social Security recipients from having their payments decrease from one year to the next because of an increase in the Medicare Part B premium. (Medicare Part B pays for outpatient services like doctor visits, outpatient treatments, and medical equipment. Medicare Part B is optional, but most Medicare recipients opt to receive Part B.)

The hold harmless rule applies to many, but not all, Social Security recipients. Most people who receive Social Security retirement or disability benefits and are enrolled in Medicare Part B are eligible for protection under this rule. Whether this rule comes into play in a particular year depends on the amount of COLA and the Medicare Part B premium increase. The hold harmless rule is expected to help a small percentage of people in 2024.

How Much Is Social Security's COLA?

Whether the hold harmless rule is needed in a particular year depends partly on the COLA for that year. Every year, the Social Security Administration (SSA) makes an annual cost of living adjustment (COLA) to its retirement and disability payments to keep pace with inflation. The idea is to give Social Security recipients enough money so that they can afford higher consumer prices.

The SSA calculates COLA every year based on the difference in the consumer price index (CPI) from the end of the third quarter of one year to the next. COLA usually causes Social Security checks to go up, but when consumer prices drop, the COLA is lower or drops to zero.

The past couple of years have had fairly high COLAs, but before that, there were some years with low or no COLAs. For 2024 payments, the COLA is 3.2%. For 2023, the COLA was 8.7%.

How Much Is the Medicare Part B Premium?

Medicare premiums usually rise every year. But in 2023, the monthly premium for Medicare Part B actually decreased to $164.90, from $170.10 in 2022.

In 2024, the Part B premium went up to $174.70.

Some people who have high incomes (or whose spouses have high incomes) have to pay a supplement for Part B coverage. The supplement is called the Income Related Monthly Adjustment Amount (IRMAA) and has to be paid by those with an adjusted gross income of $103,000, or $206,000 for a married couple.

When Does the Hold Harmless Rule Take Effect?

When there's an increase to the Medicare Part B premium and a low or no COLA, as in 2021, the hold harmless rule helps many people. When the Medicare premium rises without the COLA keeping pace, Social Security recipients might have a reduction in their Social Security check to pay for the increased Medicare premium. Fortunately, the hold harmless rule prevents that from happening for most Social Security recipients.

The hold harmless rule only applies to Social Security recipients who have their Part B premiums automatically deducted from their Social Security payments every month (but the vast majority of Medicare recipients do).

Because of the high COLA for 2022 and 2023 Social Security payments, the hold harmless rule wasn't needed in these years. And the COLA in 2024 likely covers the 2024 increase in the Part B premium for most people. But if you receive a small monthly Social Security retirement or disability benefit ($300 or less) in 2024, the hold harmless rule may kick in to protect your Social Security check from decreasing by a few dollars.

Who Does the Hold Harmless Rule Protect?

The hold harmless rule applies to all Social Security recipients except the following:

• wealthy Social Security recipients who have to pay the supplement for Part B coverage
• Social Security recipients who don't get the Part B premium taken out of their Social Security checks
• those receiving Medicare for the first year, and
• low-income Medicare recipients whose Part B premiums are paid by their state Medicaid agencies.

Also note that the hold harmless rule doesn't apply to the Medicare Part D (prescription drug) premium, only to the Part B premium. Learn more about the 2024 Medicare premiums, deductibles, and copays.