I plan on taking survivor SS at age 60 and then go on Medicare at age 65. At age 70 I plan on taking my SS. My SS will be substantially higher than the survivor, about 2- 3x's in future dollars. My question is, when I switch over will the premiums for Medicare rise substantially as well? I don't think the Hold Harmless law will apply since my SS will be higher so any Medicare premium increase will not cause my SS to decrease, at least for the first year. I am worried that the premium will jump significantly and then stay there forever and change with COLA's. It will be almost like not having taken Medicare and then applying for it and getting a whopping premium, much like the one in 2016 was going to be for new Medicare filings or those who paid directly.

Thanks for your assistance.

Regards,
Chip

Hi Chip,

Possibly, but I can't imagine that any increase would be substantial enough to cause you to change your plans. Based on your question, I think you might have a misunderstanding of how the 'hold harmless' provision works. The vast majority of people with Part B Medicare coverage are now paying the standard monthly premium rate of $135.50, including those whose premium rates were lower than the standard amount in past years due to the hold harmless provision. The Social Security cost of living increases (COLA) of 2% and 2.8% in the last 2 years have resulted in benefit rate increases large enough for almost everyone receiving Social Security benefits to be able to pay the standard premium rate without a resulting reduction in their net benefit amount.

For example, say Bob started receiving Social Security benefits in 2016 and received a relatively low benefit rate of $500. Bob started out paying the standard Part B premium rate of $121.80, so his net benefit rate after withholding was $378.20. In 2017, the standard Part B premium increase rose to $134 and Social Security benefit rates rose by only .3%. The .3% COLA increased Bob's gross benefit rate to $501.50 (i.e. $300 x 1.003), and without the hold harmless provision the higher Part B premium rate would have caused Bob's net benefit amount to drop to $367.50. However, since the hold harmless provision protected him from such a drop, his Part B Medicare premiums only rose to $123.30 so that Bob's net benefit rate would continue at $378.20.

In 2018, the 2% COLA increased Bob's gross benefit rate to $511.50 and the standard Part B premium remained at $134. Without the hold harmless provision Bob's resulting net benefit rate would have been $377.50, but since that would have caused a net benefit rate reduction for Bob, his Part B premium rate only rose to $133.30 to keep his net benefit rate at $378.20. Then in 2019, the 2.8% COLA increased Bob's gross benefit amount to $525.80 while the standard Part B premium rose to $135.50. The resulting net benefit amount of $390.30 gives Bob an increase from his previous rate of $378.20, so Bob is now back to paying the standard Part B premium rate.

Therefore, in our example above the hold harmless provision only gave Bob a small Part B premium rate advantage for a limited period of time. The hold harmless rule really only factors in during periods of stagflation and/or if the standard Part B premium rate increases by an abnormal amount. It certainly doesn't sound like you should alter your filing strategy due to concerns about Part B premium rates and the hold harmless provision. It sounds like the filing strategy you've outlined is likely your best option, although you may want to consider using our software to be sure.

Best, Jerry