Articles circulate yearly telling retirees their Medicare Part B premiums may be increasing by 50%. Medicare is required by law to recover 25% of expenses for covered doctor, outpatient and medical equipment costs through the premium it collects from users. The cost of these expenses is rising and thus users across the board could see their premiums rise by some amount.
Fortunately (or unfortunately) inflation has been relatively benign this past year mainly due to the pandemic. Social Security recipients will see a 1.3% increase in benefits in 2021 from the annual cost of living adjustment (COLA). However, the “hold harmless rule” ensures that Social Security checks will not decline from one year to the next because of increases in Medicare Part B premiums. Even without a COLA adjustment to Social Security checks, most Medicare user’s premiums will remain unchanged.
The hold harmless rule applies to most, but not all, Social Security recipients. A relatively small number of retirees with incomes above $88,000 for single people and $176,000 for married couples (in 2021) are required to pay higher premiums for Medicare Part B and Part D, which is based on your 2019 income. Retirees in this income range are grouped into six different tiers and expected to pay 35% to 80% of program costs, depending on their income. After nearly a decade, the income brackets used to determine IRMAA surcharges are once again indexed to inflation. Income thresholds will be indexed to inflation starting in 2021, except for recipients in the two highest tiers, which were added in 2019. These top two tiers will be indexed to inflation starting in 2028. If your Medicare premiums increased in 2020 it is most likely because your income exceeded the threshold in 2018.
Originally published September 2015