How does the 'hold harmless' provision protect beneficiaries from Medicare Part B premium increases?

What is Medicare's hold harmless provision?

In years when the Social Security Cost of Living Adjustment (COLA) is smaller than the increase in Medicare Part B premiums, a policy known as the “hold harmless” provision protects many Medicare beneficiaries. It limits the Medicare Part B premium increase to ensure that beneficiaries’ Social Security checks don’t decrease.

But it’s only necessary in years when the COLA isn’t sufficient to cover the full amount of the standard Part B premium increase. The last time this happened on a broad scale was in 2017. But as discussed below, it can happen to a small fraction of enrollees even in a year where most enrollees aren’t affected.

Does Medicare's hold harmless provision affect deductibles or late enrollment penalty amounts?

No, the hold-harmless provision does not have any effect on enrollees’ Part B deductibles or late-enrollment penalties.¹

So even if an enrollee’s regular Part B premium is lower than it would otherwise have been as a result of the hold harmless provision, their deductible will be the same as any other enrollee’s, and if they’re subject to a late enrollment penalty, that will still be charged in full.

Does the Medicare Part B premium increase each year?

When Medicare debuted in 1966, the Part B premium was $3 per month. But the Part B premium is $174.70 per month as of 2024. Although there have been some periods 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, and 2012 and 2023, when it decreased – it has generally increased every year.²

What is the connection between Social Security benefits and Medicare premiums?

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 if there wasn’t a mechanism to protect against this).

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 can potentially protect up to about 70% 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.¹ The “hold harmless” provision does not apply to about 30% of Medicare enrollees, including those who are new to Medicare, those who aren’t receiving Social Security checks, and those who pay higher Part B premiums because they have high incomes.

According to the Congressional Research Service, the hold-harmless provision normally “affects only a small number of beneficiaries,” and in most years this is limited to beneficiaries whose Social Security checks are relatively low.¹ For example, in 2022, only about 1.5% of Medicare beneficiaries had their Part B premiums limited by the hold-harmless provision, because the COLA was adequate to cover the full Part B premium increase for the rest of the beneficiaries.¹

But in years when the Part B premium increase is large and the COLA is small, a larger group of Medicare beneficiaries can be protected by the hold-harmless provision. Because COLAs weren’t large enough to cover the full Part B premium increases in 2016 and 2017, most beneficiaries were paying less than the standard amount for their Part B coverage in those years. In 2017, for example, 70% of Medicare Part B enrollees were paying a lower-than-standard Part B premium due to the hold-harmless provision. But by 2019, that had dropped to only 3.5%, because COLAs for the rest of the enrollees had been sufficient to cover the full amount of the Part B standard premium increase without them experiencing a decrease in their Social Security checks.¹

In most years, Social Security’s COLA results in a large enough increase for most enrollees 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.

Which Medicare beneficiaries are not protected by the hold-harmless rule?

For Medicare beneficiaries who are not “held harmless,” Part B premiums can increase by as much as is necessary to reach the standard rate for that year. This includes the following groups of people:¹

People who are new to Medicare
People who aren’t receiving Social Security benefits
People who pay higher premiums for Medicare as a result of having high incomes.

The ‘hold harmless’ provision’s impact in recent years

For 2023, the Social Security COLA was 8.7%, averaging $140/month.³ The standard Part B premium decreased by more than $5/month, so the hold harmless provision was not necessary for any beneficiaries.

For 2020, the Social Security COLA was 1.6%, 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 paid less because of the “hold harmless” provision.

For 2019, the Social Security COLA was 2.8%. 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. Of the Medicare Part B enrollees who were subject to the hold-harmless provision, only about 3.5% received COLAs that still weren’t sufficient to cover the full increase in their Part B premiums. Those individuals paid less than the standard premium in 2019.¹

For 2018, the Social Security COLA was 2%. The standard Part B premiums remained at $134/month, and the 2% 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 — slightly lower than the standard premium, thanks to the hold-harmless provision.

For 2017, the provision meant that the 10% Part B premium increase for that year (from $121.80/month to $134/month) only applied to about 30% percent of Medicare enrollees. The other 70% paid about $109/month (up from $104.90/month in 2016).¹

The 10% increase in Part B premiums for 2017 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% 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 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.

For beneficiaries who were not “held harmless” for 2016, premiums for Part B increased by about 16% over 2015 rates (which was substantially lower than the 52% increase that would have taken effect if Congress hadn’t taken action in late 2015 to prevent it).

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.

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