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Medicare reducing Social Security COLA

Medicare and Social Security is an important part of long term planning for seniors for payment of their medical and other important needs. Recent changes to Medicare premiums reveals the interrelationship between these programs.

Social Security benefits were supposed to raise by two percent at the beginning of this month. This would have raised monthly benefits by an average of $25 to $30 per month for most seniors. However, a new law concerning Medicare premiums led to the channeling of Social Security benefits into the payment of higher Medicare costs.

For Social Security recipients on Medicare, the federal government deducts Medicare Part B medical insurance premiums from their SSA payments. This provides simplification for the government.

However, a special law contains a hold harmless provision that protects Social Security benefits if there are no cost-of-living increases even though Medicare premiums rise. This also provides for a claw-back of SSA benefits to pay these premiums when Social Security benefits increase. Social Security Benefits do not rise as much as any cost-of-living adjustments if Medicare premiums increase

In 2016, Part B monthly premiums rose to $121.80 from $104.90. However, there was no COLA increases for Social Security that year because prices fell. Without hold harmless protection, SSA beneficiaries would have seen a $17.00 decrease in their monthly benefits to pay for Medicare.

In 2017, a 0.3 percent SSA cost-of-living adjustment allowed premiums collected from most beneficiaries to exceed $104.90 each month. However, this was still below the $134 per month that Medicare charged recipients who were not covered by Social Security in 2017.

Baseline premiums for Part B for most participants remained at $134 per month for 2018 which was the same cost in 2017. The two percent increase in Social Security benefits under the law's claw-back provision, however, must pay for earlier increases in Medicare payments that were not charged.

The increase in premiums for Social Security beneficiaries will provide equivalency with those who do not collect Social Security. It is anticipated that these beneficiaries will keep any future SAA cost-of-living increases in 2019 and later. However, this does not reduce the financial challenges for beneficiaries this year.

An attorney can help provide financial options on Medicare planning and utilizing government programs. This can help assure that health and other important needs are met.

Source: Motley Fool, "Hey! Why didn't my Social Security go up?," By Dan Caplinger, Jan. 8, 2018

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