Final 2017 numbers for Social Security COLA and Medicare Premium Increases

The Centers for Medicare and Medicaid (CMS) — The agency that oversees Medicare and Social Security-recently announced the final figures on 2017 cost of living increases for Social Security and new Medicare premiums and deductibles.

Social Security recipients will receive a tiny 0.3% cost of living adjustment (COLA) increase for 2017. This would increase the average Social Security benefit of $1355 by about $4 per month in 2017. Most people, however, won’t actually see a penny of that money in their pocket. That’s because an even larger increase in Medicare Part B premiums will eat up the entire COLA increase for the majority of individuals.

Here is a quick rundown of how Medicare Part B premiums will change in 2017 for most people:

If your current Medicare premium is $104.90 it will rise to $109 (on average). This applies to most people whose first Social Security check and Medicare started in 2015 or earlier.

If your current Medicare premium is $121.80 it will rise to $126 (on average). This applies to most people whose first Social Security check and Medicare started in 2016.

If your Medicare starts in 2017: Medicare premium will be $134.00 (for most individuals). That’s about a 10% increase compared to the $121.80 paid by most people who started Medicare coverage in 2016.

Normally, as Medicare Part B premiums increase, Social Security needs to deduct a larger amount from your Social Security check to pay for the increased Medicare premium. In a year when Social Security has a very small COLA increase, as is happening now–deducting the full Medicare rate increase could cause your Social Security check to actually shrink.

Fortunately, a “hold harmless” provision in the law prevents most Social Security checks from going down due to an increase in Medicare premiums. This hold-harmless provision will limit your 2017 Medicare increase to the amount of your Social Security COLA increase, rather than the full Medicare increase. This means that although your Medicare premium is going up slightly in 2017, it will be offset dollar for dollar by the COLA increase in your Social Security benefits; thus, Social Security checks will remain unchanged for most individuals.

Here is a summary of how different individuals may be affected:

  1. Those currently receiving Social Security benefits and having their Medicare deducted from their Social Security (70% of the Medicare population): Most of these individuals will not experience any decrease in their Social Security checks because of the “hold harmless” provisions.
  1. Individuals who are on Medicare, but not receiving Social Security benefits: These individuals, comprising about 30% of the Medicare population, are not protected by the hold harmless provisions and most will see their Medicare premiums go up to $134 per month.
  1. Higher earning individuals, regardless of whether drawing Social Security or not: Higher income individuals (i.e. those making over $85,000 (single) or over $170,000 for a couple, are NOT protected by the hold-harmless provisions of the law, even if they are already drawing Social Security benefits. These individuals will see their Social Security checks reduced to pay for the increased Medicare premiums.

These high income individuals will actually pay quite a bit more than the new premium of $134. Depending on their income, these individuals will pay anywhere from $187.50 to $428.60 for their Medicare Part B premium.

Deductible change:

In addition to premiums going up in 2017, the Medicare Part B yearly deductible will increase in 2017 from $166 to $183 for all Medicare beneficiaries.

                      

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