October 10, 2010 - Center for Medicare Advocacy
SOCIAL
SECURITY: NO COST OF LIVING ADJUSTMENT
MEDICARE: NO CHANGE FOR MANY, HIGHER PREMIUMS FOR SOME
As expected, the Social
Security Administration (SSA) has announced that there will not be a
cost of living adjustment (COLA) in 2011 for the 54 million
recipients of Social Security benefits. The COLA is an increase to
help Social Security beneficiaries keep pace with the rise in
inflation. There will be no COLA in 2011 because there has been no
increase in inflation thus far during the tracking period. Although
the COLA is not a raise, many Social Security recipients think of it
as such.
While the lack of a COLA for 2011 may
seem unfair to many, the SSA announcement is in keeping with the statutory
calculation of the COLA.
The "Hold Harmless" Provision
A hold harmless provision in the
Social Security Act disallows an increase in the Medicare Part B premium for
qualifying Social Security recipients if their COLA is not large enough to cover
the increase in the Part B premium. Although the Centers for Medicare &
Medicaid Services (CMS) has not yet announced the Part B premium for 2011, the
principles of hold harmless will apply regardless of the amount.
To be protected by the hold harmless
provision, a beneficiary must[1]:
-
Be entitled to Social Security
benefits for November and December of the preceding year. (For the next
cycle, November 2010 and December 2010)
-
Have the Medicare Part B premium
deducted from Social Security benefits in December of the preceding year and
January of the current year. (For the next cycle, December 2010 and January
2011) (The discrepancy between months of entitlement and months of check is
due to the program design that has the beneficiary receiving the check for
last month's benefits in the current month, e.g. December's benefits come in
January.)
-
Not receive a COLA that is
greater than the Part B premium increase. (For the next cycle, no one will
receive a COLA.)
-
Not have a modified adjusted
gross income over a certain amount. ($85,000 for an individual and $170,000
for a couple in 2011.)
Because of the hold harmless
provision, most Social Security recipients will not see an increase in their
Part B premiums in 2011.
Who Will Face a Premium
Increase?
Most Social Security recipients will
be protected by the hold harmless provision. A significant number (last year it
was about one quarter of all recipients), however, will see an increase in Part
B premiums because they do not qualify for the hold harmless provision. Those
affected fall primarily into three groups.[2]
These three groups are:
-
New Medicare beneficiaries;
-
Higher-income beneficiaries
(modified adjusted gross income greater than $85,000 for individuals and
$170,000 for couples in 2011); and
-
Beneficiaries whose Part B
premiums are paid by the state through one of the Medicare Savings Programs
(MSPs).
Beneficiaries new to Medicare in
2011, even if they received Social Security benefits in November and December,
will not have had Medicare premiums deducted from their checks in both December
2010 and January 2011. Because they were not paying Part B premiums for the
last two months of 2010, they will not have experienced a decrease in benefits
in 2011 that is due to the increase in the Part B premium.
Next, beneficiaries who, because
their incomes exceed a threshold set in the law, are required to pay a higher,
income-related Part B premium are explicitly excluded from the hold harmless
provision.[3]
Third, the roughly seventeen percent
of Medicare Part B beneficiaries who are dually eligibles for Medicare and
Medicaid and whose Part B premiums are paid by the state, usually through one of
the Medicare Savings Programs (MSPs)[4]
are not subject to the hold harmless provision. Dual eligibles are not protected
by the hold harmless clause because their Part B premiums are not deducted from
their Social Security checks. Dual eligibles are not directly affected, however,
as the increased premium will be paid by their state Medicaid program.
A subset of the dually eligible group
consists of those who will not qualify for an MSP for all of 2011. When they
lose MSP coverage, they will have to pay the higher Part B premium since their
premiums were not being taken from their checks at a time when they could have
qualified for the hold harmless provision. Not only will they suddenly have to
pay the Part B premium themselves, but they will have to pay an increased
premium. Unless something is done legislatively to change the situation, those
who lose their MSPs in 2011 will be forced to pay the 2011 Part B premium
increase. Last year, when a similar situation existed, legislation was not
enacted protecting this group of people.
Lastly, there is a small group of
former Social Security Disability Insurance (SSDI) recipients who still qualify
for Medicare even though they no longer receive SSDI.[5]
They pay their Part B premiums out of pocket directly to Social Security.[6]
The hold harmless provision states that one must receive monthly social security
benefits and have the Part B premium deducted from those benefits in order to
qualify for protection.[7]
It would seem that since former SSDI recipients do not currently have a benefit
to deduct a Part B premium from, they will not qualify for hold harmless
protection. Another group of SSDI recipients facing the possibility of having
to pay the higher premium in 2011 comprises those beneficiaries who are
receiving SSDI benefits, but who will not become eligible for Medicare until
2011 because of the twenty-four month waiting period. These individuals will
also have to pay the premium increase.
The chart below illustrates how
different types of Part B beneficiaries are affected:
Type of Beneficiary |
Hold Harmless Applies? |
Part B Premium
Increase? |
If Premium Increased,
Why? |
Premium Withheld from
Social Security Check, Not Income-Related |
Yes |
No |
N/A |
Premium Withheld, Pays
Income-Related Premium |
No |
Yes |
Specifically excluded
from hold harmless provision. |
New Beneficiaries |
No |
Yes |
Have not been enrolled in
Part B long enough |
Enrolled in an MSP |
No |
Yes, but the state pays |
Part B premiums are not
withheld from their Social Security benefits |
Lose MSP during 2010 |
No |
Yes |
Part B premium not
withheld from their Social Security benefits |
Direct Pay Status
(Premium Not Withheld from Social Security Check) |
No |
Yes |
Part B premiums are not
withheld from their Social Security benefits (they don't receive
any) |
SSDI Recipients Who
Become Eligible for Medicare in 2011 |
No |
Yes |
Part B premium not
previously withheld from their Social Security benefits. |
Further Effects on Social Security
Recipients: Part D Increase
Even those protected by the hold
harmless provision may still see a decrease in their Social Security checks due
to an increase in Medicare Part D premiums. Medicare beneficiaries with the
full low-income subsidies (LIS) do not pay Part D premiums and will not be
affected. However, more than two million low-income beneficiaries are eligible
for LIS benefits, but are not receiving them.[8]
According to a recent report by the Kaiser Family Foundation, Part D premiums
have increased by about fifty-seven percent since the program went into effect
in 2006.[9]
Frequently Asked Questions about
the Hold Harmless Provision and about the Income-Related Premium
If I lose my Medicare Savings Program
during 2011, what amount of premium will I pay?
Because your state paid your Part
B premium and thus it was not deducted from your Social Security checks for
months that would qualify you for the hold harmless provision, you are not
among those who are held harmless. You will have to pay the standard premium
which has not yet been announced by the Center for Medicare & Medicaid
Services (CMS).
I have both my Part D premium and my
Part B premium deducted from my Social Security check. My Part D premium went
up for 2011 and that full amount is being deducted from my check. Isn't there a
hold harmless provision for Part D?
Unfortunately, there is not such
a provision. The operation of the Part B hold harmless provision only
protects beneficiaries from a reduction that would be caused by the Part B
premium amount.
I have to pay a late enrollment
penalty, but my Part B premium was deducted from my Social Security checks for
November and December of 2010. Does that mean my penalty is waived for 2011?
Your penalty is not waived and it
will be calculated on the standard premium (not yet announced) for 2011.[10]
The hold harmless provision protects an individual from an increase in
his/her Part B premium "to the extent that such increase would reduce the
amount of benefits payable to that individual for that December below the
amount of benefits payable to that individual for that November."[11]
This language suggests that you would not pay more than you did in 2010.
However, according to implementing regulations, a late enrollment penalty is
added to the so-called non-standard premium and, since the late enrollment
penalty is calculated on the standard premium, it is likely to result in a
higher premium than you paid last year.
I have to pay more than the standard
Part B premium because I enrolled late into Part B and did not have my premium
taken from my check. Now my Part D premium went up for this year, too. But my
income is only about $1,000 a month and I have almost nothing in the bank. I'm
thinking of dropping Part B because I can't afford the premiums anymore. I
might have to drop Part D, too, because I can't really afford it, but I have
lots of prescriptions and don't know what I would do if I had to pay all of it
myself.
You should not drop Part B or
Part D. You are probably eligible for a Medicare Savings Program from your
state, as well as for the Part D Low-Income Subsidy (LIS). The Medicare
Savings Program would pay your entire Part B premium and you would be
relieved of your late enrollment penalty. The Part D Low Income Subsidy
would entitle you to a premium-free Part D plan and to very low payments for
each prescription. Contact your state Medicaid program to apply for
Medicare Savings Programs and Social Security (www.ssa.gov)
to apply for the Low Income Subsidy or find a State Health Insurance Program
(www.shiptalk.org)
near you to help you through the applications.
I'm confused. Some things I read
refer to November and December as being the months that are relevant for
qualifying for the hold harmless provision and some refer to December and
January. Which is right?
Both references are correct. The
confusion lies in a disparity between Social Security and Medicare law with
respect to when benefits are paid and premiums are deducted. Your Social
Security check for November is actually paid to you in December and the Part
B premium amount that is withheld from it is the payment for December.
Similarly, your December Social Security benefit is paid in January and the
Part B premium amount for January is taken from that check. The hold
harmless provision says that the Part B premium amount should not result in
the benefits due for December (received in January) being lower than the
benefits due for November (received in December).[12]
I am paying a Part B income-related
premium for 2010 based on my income of $96,000. If my income goes down in 2011,
will my premium continue to be calculated on the standard $110.50 premium for
2010?
The short answer is no, but a
more complete answer is a little complicated. First, each year's standard
premium amount is based on projected Medicare Part B costs for that year
rather than on the previous year's standard premium. And the Part B
income-related premium is based on the standard premium. So the premium
amount for 2010 will not be a factor in determining either the standard or
the income-related premium amount for 2011. Second, the amount of an
individual's Part B income-related premium is first determined by the Social
Security Administration (SSA) based on income tax returns from two years
prior to the year for which the premium is being determined. Your Part B
income-related premium for 2010 was calculated on your 2008 income. If your
modified adjusted gross income goes below the threshold for the Part B
income-based premium for an individual ($85,000) in 2011, your premium will
still be calculated by SSA on a prior year's tax return, so may continue to
reflect higher income. Should that occur, you can appeal the SSA
determination of your premium amount by showing evidence of your actual
income.[13]
I am a retired high school teacher
who did not contribute to the Social Security system. Nonetheless, I am
entitled to a small Social Security benefit but my government pension offset
reduces my check to about $90. For 2010, the entire Social Security benefit
went to pay my Part B premium and I paid the small difference by check.
Medicare tells me I must pay the higher standard premium for 2011. Is that
right?
Regulations governing the
application of the hold harmless provision do include reference to benefit
offsets due to government pensions, but it is unclear if these regulations
would protect you in the situation you describe.[14]
You should contact the Social Security Administration to see if you qualify
for relief based on these provisions.
Conclusion
Most Medicare Part B beneficiaries
will not have to pay the Part B premium increase because there is no Social
Security COLA in 2011. This means that the beneficiaries who do will see a
substantial increase in their premiums. Since most of that group consists of
dually eligible people, the states will bear much of that cost. Even those who
qualify for the hold harmless provision could see a decrease in their Social
Security checks in 2011 because of Medicare Part D.
President Obama and Speaker of the
House of Representatives Nancy Pelosi both support a one-time $250 payment to
all Social Security recipients to compensate for the lack of COLA. Speaker
Pelosi has promised a vote on legislation introduced by Congressman Earl Pomeroy
(D. N.D.) as the Senior Protection Act of 2010.[15]
Senator Bernie Sanders (I-VT) has introduced similar legislation in the Senate
in S. 1685, The Emergency Senior Citizens Relief Act of 2009. Neither of these
bills would change the "hold harmless" provision of the Social Security Act to
cover the groups not currently protected by the hold harmless provision.
For more information, contact
Patricia Nemore in the Center for Medicare Advocacy's Washington, DC office at
(202) 293-5760 or
pnemore@medicareadvocacy.org.
[1] 42 U.S.C. § 1395r(f).
[4] The three MSPs are the
Qualified Medicare Beneficiary (QMB), Specified Low-Income Medicare
Beneficiary (SLMB), and Qualified Individual (QI) programs.
[5] Ticket to Work and Work
Incentives Improvement Act of 1999, 42 U.S.C. 1320b-21.
[6] The number of people in
this group is so small that this group was not does not appear in the
Kaiser discussion of the twenty-five percent of people who will be
affected by the Part B premium increase.
[8] Kaiser Family Foundation
Issue Brief, "The Social Security COLA and Medicare Part B Premium:
Questions, Answers, and Issues. Page 4. www.kff.org.
[12] 42 U.S.C.§§ 1395r(f) and
1395s(a)(1) and (b)(1)
[14] 42 C.F.R.§ 408.20(e)(3)
and (e)(4)(ii)(B)
[15] H.R. 5987, introduced in
July 2010. Although the bill is named Senior Protection Act, it would,
in fact, provide payments to all 54 million recipients of Social
Security benefits, only about 63% of recipients of Social Security
benefits are retirees age 62 or older. The rest are their spouses and
dependents, or people with disabilities and their spouses and
dependents, or surviving spouses and dependents of deceased workers.
Copyright 2010 Center for Medicare Advocacy, Inc.