Medicare Part B Premiums Will Come Out of Your $75 COLA First: How the Hold-Harmless Rule Protects Your Benefit

Your Social Security increase may look far smaller once Medicare enters the picture, and a lesser-known safeguard is what keeps some seniors from taking an even bigger hit to their monthly check.

Social Security is set to deliver one of its biggest benefit increases in years. Once the cost-of-living adjustment, or COLA, takes effect, monthly benefits will rise by 3.6%.

For retirees who also have Medicare, though, that raise may not fully reach their pockets. Medicare Part B premiums are deducted directly from Social Security benefits, and those premiums are expected to climb as well.

How a higher Part B premium can reduce a COLA

Based on the average retirement benefit, the 2027 COLA is projected to add about $75 a month for the typical senior. But that figure could be noticeably different for Medicare enrollees.

The standard monthly Medicare Part B premium has not yet been announced. In the previous year, however, it rose by $17.90 a month.

Part B may not increase by that much, but any rise will directly offset part of the upcoming COLA. For instance, if the premium goes up by $10 a month, a retiree who would otherwise have seen a $75 increase would instead get a net monthly boost of just $10.

The hold-harmless rule limits how much seniors can lose

There have been years when Social Security COLAs were modest while Part B costs climbed sharply. In those cases, premium increases could wipe out a raise completely and even leave beneficiaries with a smaller check.

That is where the hold-harmless provision comes in. It prevents a higher Medicare Part B premium from reducing someone’s Social Security benefit from one year to the next.

For example, if Bob qualifies for a $12 COLA increase but Part B rises by $15 a month, his benefit would technically be $3 lower without this protection. With hold-harmless in place, his monthly benefit would simply remain unchanged.

Because the upcoming COLA is relatively strong, even a meaningful Part B increase should still leave most seniors with a solid gain in their Social Security payments. Still, the hold-harmless rule matters in years when COLAs are small and Medicare premiums rise more quickly.

When the next Medicare Part B update is expected

The Centers for Medicare & Medicaid Services released official Part B costs in mid-November last year, so another announcement should arrive around that time.

Until then, Social Security recipients may want to wait before finalizing their budgets for the coming year. If the final net increase turns out to be too small to cover expenses comfortably, some changes may be necessary.

That could mean working again in some capacity or trimming spending. Even a sizable COLA may not be enough to improve your finances if Medicare Part B ends up taking a large bite out of it.