If A Person Doesn't Qualify For The 'Hold Harmless' Law, Does It Affect Their Future Medicare Premium Amounts?

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Jul 7 2020 - 10:41am

Concerning the "Hold Harmless" law. If a person was subjected to higher Medicare Part B premiums in 2021, due to not qualifying for this provision, does this affect their future Medicare premium amounts in 2022, or future years?

Assume there is no cause for "Hold Harmless" in those future years, only in 2021. Thanks for any replies!

Hi,

I'm not sure I understand your question. 'Hold harmless' is a commonly used reference for the variable supplementary medical insurance (VSMI) premium provision, and supplementary medical insurance is the proper term for Part B of Medicare. The purpose of the VSMI provision is to prevent people from seeing a reduction in their net Social Security benefit rate as a result of a statutory increase in Medicare Part B premium rates. In other words, if a person's Social Security cost of living increase (COLA) isn't high enough to cover the increased cost of their Part B premium, then their Part B premium rate can potentially be reduced so that their net Social Security payment doesn't go down. Such reduced premium rates are reevaluated each year, so depending on COLA amounts and the yearly Part B premium rates, most VSMI premium reductions are only temporary.

For example, say Bob is drawing Social Security benefits and has the standard Part B premium rate of $144.60 withheld from his payments. After his premiums are withheld, Bob's Social Security benefit payment amounts to $1500. If there is no COLA at the end of 2020 and if the standard Part B premium rate increases, then Bob could have his Part B premium frozen at $144.60 for the year 2021.

However, say at the end of 2021 a 2% Social Security COLA is announced. That would then be applied to Bob's gross benefit rate of $1644.60, raising it to $1677.50. Then let's say that the standard Part B premium rate for 2022 goes up to $177.50. Bob could then pay the full standard Part B premium rate without lowering his net Social Security benefit payment (i.e. $1677.50 - $177.50 = $1500), so Bob would have to pay the full Part B premium rate in 2022.

Barring an extended period of very small or no Social Security COLAs, the potential benefits from VSMI are likely to be temporary and relatively small. Therefore, we believe that in most cases people should not alter their filing plans for Social Security benefits in order to qualify for VSMI. Making sure to choose a filing strategy that results in maximizing a person's Social Security benefits is almost certain to be much more important than concerns about the VSMI provision.

Best, Jerry