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Four ways to save money on your Medicare Part B premiums
Here's how to save money on premiums for Medicare Part B – which covers doctor visits, diagnostics, and preventive care.
How do Medicare Savings Programs help with Medicare costs?
Medicare Savings Programs (MSP) can pay Medicare Part A and Part B premiums, deductibles, copays, and coinsurance for enrollees with limited income and limited assets.
Making Medicare work for the poorest Americans
There are three main ways for lower-income Medicare beneficiaries to cover out of-pocket-costs when they can't afford to purchase a Medigap supplemental plan or a Medicare Advantage policy.
A policy known as the “hold harmless” provision protects many Medicare beneficiaries by essentially capping Medicare Part B premiums so increases aren’t higher than Social Security’s Cost of Living Adjustment (COLA).
When Medicare debuted in 1966, the Part B premium was $3 per month. But the Part B premium is $144.60 per month as of 2020. Although there have been some stretches of time when the premium declined from one year to the next or remained steady – 2013 through 2015, for example, when it was $104.90/month each year – it has generally increased every year.
Most Medicare beneficiaries are also receiving Social Security benefits, and their Part B premiums are automatically deducted from their Social Security checks. Social Security benefits also tend to increase over time due to the Cost of Living Adjustment (COLA). But sometimes the Medicare Part B premium increase is larger than the Social Security COLA. In that situation, the result would be a decrease in net Social Security checks from one year to the next (for example, if the COLA only adds $5/month to a person’s check but their Part B premiums go up by $8/month, their net Social Security check would be $3/month smaller in the second year).
To avoid that sort of scenario, there’s a provision that prevents Social Security checks from declining from one year to the next, essentially capping Medicare Part B premium increases at no more than the amount of each enrollee’s COLA. This is called the “hold harmless” provision, and it protects about 70 percent of Medicare beneficiaries from having to pay the full amount of the Part B premium increase in years when the COLA wouldn’t be enough to cover the premium hike. (Note that the “hold harmless” provision does not apply to people who are new to Medicare, or who pay higher Part B premiums because they have high incomes.)
After remaining steady for three years, Medicare Part B premiums started increasing again in 2016, and again in 2017. They remained steady in 2018, but increased again in 2019. However, because COLAs weren’t large enough to cover the increases in 2016 and 2017, most beneficiaries were paying less than the standard amount for their Part B coverage.
By 2019, however, the COLA was sufficient to allow nearly all Part B enrollees to pay the standard amount for their coverage, without experiencing a drop in their net Social Security checks.
In most years, Social Security’s COLA results in a large enough increase that higher Part B premiums can be deducted from the new payments without ending up with Social Security checks that are lower than the previous year.
For beneficiaries who are “held harmless,” and for whom the Part B increase would otherwise exceed their Social Security COLA, the Part B increase ends up being limited to the amount of the COLA. That means their full COLA is used to cover the Part B premium increase and they’ll end up with Social Security checks that are exactly the same as they were the year before.
For 2020, the Social Security COLA was 1.6 percent, which increased the average retiree’s benefit by about $32/month. Part B premiums for most people increased slightly to $144.60/month. As was the case in prior years, some beneficiaries are again paying less because of the “hold harmless” provision.
For 2019, the Social Security COLA was 2.8 percent. The standard Part B premium increased only slightly, to $135.50/month, the COLA was more than adequate to cover the full increase for most enrollees. The federal government estimated that only about 3.5 percent of Medicare Part B enrollees would receive COLAs that still weren’t sufficient to cover the full increase in their Part B premiums, and would thus still be paying less than the standard premium in 2019.
For 2018, the Social Security COLA was 2 percent. The standard Part B premiums remained at $134/month, and the 2 percent COLA was enough to cover most of the increase (from the 2017 average premium of $109/month). Once again, the full COLA for most beneficiaries went towards the higher Part B premiums, and didn’t quite cover the full amount. So the average Medicare Part B enrollee was paying about $130/month in 2018.
For 2017, the provision meant that the 10 percent rate increase for that year (from $121.80/month to $134/month) only applied to about 30 percent of Medicare enrollees. The other 70 percent paid about $109/month (up from $104.90/month in 2016).
The 10 percent increase in Part B premiums was a smaller increase than previously projected, as CMS used “statutory authority to mitigate projected premium increases for these beneficiaries.” But the COLA that year was only 0.3 percent, which amounted to an average of just over $4/month. So average premiums for most Medicare Part B enrollees were only able to increase by about $4, to $109/month.
Exact premiums varied based on how much a beneficiary was receiving in Social Security. The 0.3 percent COLA applied to all Social Security recipients, but those with larger Social Security checks had a COLA increase that had a dollar amount greater than $4. For those folks, Medicare Part B premiums were higher than $109/month in 2017 — the only requirement was that their Social Security checks couldn’t be lower than they were in 2016.
For beneficiaries who were not “held harmless” for 2016, premiums for Part B increased by about 16 percent over 2015 rates (which was substantially lower than the 52 percent increase that would have taken effect if Congress hadn’t taken action in late 2015 to prevent it).
For 2016, the standard Medicare Part B premium was $121.80/month. But about 70 percent of enrollees were only paying $104.90 (the same rate they paid in 2015), because they were “held harmless” from the rate hike in 2016. The COLA was zero percent that year, so Medicare Part B premiums couldn’t increase at all for most enrollees. 2016 was only the third time in 40 years that the COLA was zero.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.