The Interaction Between Medicare Premiums and Social Security COLAs
Released: 2018-09-28T00:00:00

Summary:
Social Security and Medicare assist in providing financial security to most elderly and disabled individuals in the United States. Certain interactions between Social Security and Medicare may have important financial implications for individuals who are enrolled in both programs.
Social Security provides monthly cash benefits to retired or disabled workers and their family members. The Social Security benefits that are paid to retired workers are based on workers' past earnings. Medicare is a federal insurance program that pays for covered health care services for most individuals aged 65 and older. Medicare Part B and Part D are voluntary, premium-based programs for Medicare beneficiaries providing coverage for physician services (Part B) and prescription medications (Part D). Standard Medicare Part B and Part D premiums are set at a rate each year to cover approximately 25% of per capita program costs. High-income beneficiaries may pay higher than standard premiums. Individuals who are enrolled in both Social Security and Medicare must have their Medicare Part B premiums automatically deducted from their monthly Social Security benefit and may choose to have their Medicare Part D premiums automatically deducted from their monthly Social Security benefit.
Although annual adjustments are made to both the Social Security benefit an individual receives and the Medicare premiums an individual pays, these adjustments are indexed to different inflation measures. The Social Security annual cost-of-living adjustment (COLA) is based on the Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W), which is a measure of general inflation. Medicare premium growth, by contrast, is based on program expenditure growth, which reflects spending for covered medical services.
These different adjustment measures have resulted in Medicare premiums that typically increase at a rate greater than Social Security COLAs. From 2000 to 2018, Social Security COLAs have averaged a 2.2% annual increase, resulting in a cumulative benefit increase of approximately 50%, considerably less than the average 6.1% annual increase in standard Medicare Part B premiums, which has resulted in Medicare Part B premium growth of close to 195% over the same period. As a result, a greater percentage of total Social Security benefits is being deducted to pay for Medicare premiums.
Congress has acted several times to protect beneficiaries from the impact of large Medicare Part B premium increases. The hold-harmless provision, made permanent by P.L. 110-360 Section 211(b), modified the Social Security Act to prevent certain Social Security beneficiaries' monthly benefit amount from decreasing from one year to the next due to an increase in Medicare Part B premiums. The hold-harmless provision does not apply to Medicare Part D premiums and does not cover several groups of beneficiaries including high-income individuals, Medicare Part B enrollees who do not receive Social Security benefits, new enrollees, and low-income beneficiaries (typically, Medicaid will pay low-income beneficiaries' Medicare Part B premiums). When a majority of beneficiaries are held harmless, such as in years with no Social Security COLA, premiums are typically still calculated to cover 25% of the expected costs of the Medicare Part B program; thus, those not held harmless may bear the burden of meeting any resulting increase in premiums disproportionately.
The Medicare Trustees' long-range projections indicate that Medicare per capita cost growth will increase greater than inflation as measured by the CPI-W, increasing Medicare premiums at a faster rate than Social Security COLAs. The Medicare Trustees therefore project that a larger portion of Medicare beneficiaries' Social Security benefits will be required to pay standard Medicare Part B and Part D base premiums in the future. For example, in 2018, Medicare Part B and Part D premiums account for approximately 12.4% of the average Social Security benefit; the Medicare Trustees project that this will increase to approximately 14.0% in 2028 and to approximately 16.8% of the average Social Security benefit in 2092.

subsections: section_title: Introduction
paragraphs: Social Security and Medicare assist in providing financial security to most elderly and disabled individuals in the United States. In 2017, 61.9 million individuals received Social Security benefits, of which 69% were retired workers aged 62 or older and 14% were disabled workers aged 61 or younger. In 2017, nearly 90% of the U.S. population aged 65 or older received Social Security benefits, representing approximately 33% of income for this population. For half of married elderly couples in 2017, Social Security represented 50% or more of their income and for 23% of married elderly couples, Social Security represented 90% or more of their income. In Medicare, 58.4 million individuals were enrolled in 2017, of which 85% were aged 65 or older and 15% were disabled and aged 64 or younger. In 2017, total Social Security expenditures were $952.5 billion (4.9% of gross domestic product, or GDP). In the same year, total Medicare expenditures were $710.2 billion (3.7% of GDP). 
Eligible individuals may enroll in one program and not the other; however, for individuals who are enrolled in both Social Security and Medicare, certain interactions between the two programs may have important financial implications. For instance, individuals who are both Social Security beneficiaries and Medicare Part B enrollees have their Medicare Part B premium automatically deducted from their monthly Social Security benefit. Although annual adjustments are made to both the Social Security benefit an individual receives and the Medicare premiums an individual pays, these adjustments are indexed to different inflation measures. The Social Security annual cost-of-living adjustment (COLA) is based on the Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W), which is a measure of general inflation. Medicare premium growth, by contrast, is based on program expenditure growth, which reflects spending for covered medical services. These different inflation measures can mean that, over time, Medicare premiums absorb a larger portion of an individual's Social Security benefit. 
Congress has acted several times to protect beneficiaries from the impact of large Medicare Part B premium increases. For example, Congress established a hold-harmless provision in the Social Security Act for those enrolled in both Social Security and Medicare. This provision protects an individual from being charged a higher Medicare Part B premium if the increase would cause the dollar amount of his or her Social Security benefit to decrease from one year to the next. However, several groups of beneficiaries are not held harmless and increases in the Medicare Part D premium are not considered in this provision. 
This report discusses the relationship between Social Security COLAs and Medicare premiums and provides data on recent experience of the annual adjustments to Social Security benefits and Medicare premiums. The report explains how and when the hold-harmless provision is activated for certain beneficiaries and discusses the projected impact of Medicare premium growth on Social Security benefits over the next 75 years. 
section_title: Social Security
paragraphs: Social Security, established by Title II of the Social Security Act of 1935 and administered by the Social Security Administration, provides monthly cash benefits to retired or disabled workers and their family members and to family members of deceased workers. 
subsections: section_title: Social Security Eligibility
paragraphs: Workers become eligible for Social Security benefits for themselves and their family members by working in Social Security-covered employment. Generally, a worker needs 40 earnings credits (10 years of Social Security-covered employment) to be eligible for Social Security retired-worker benefits. Full Social Security retirement benefits are payable at an individual's full retirement age. The full retirement age historically was 65; however, this age has been raised from 65 to 67 so that workers born in 1960 or later will be eligible for full retirement benefits at the age of 67. Retired workers are able to receive Social Security benefits as early as age 62, though the benefits will be permanently reduced. In 2017, 31% of new retired-worker Social Security beneficiaries were 62 years old and 54% of new retired-worker beneficiaries were younger than 66 years old (the full retirement age in that year). Therefore, more than half of new retirees in 2017 had not reached the full retirement age before claiming their Social Security benefits. 
Social Security benefits also are available to disabled workers and their dependents and to survivors of deceased workers. In 2017, this population accounted for 27% of the total Social Security beneficiary population. 
section_title: Social Security Benefits
paragraphs: A retired worker's initial monthly benefit is based on his or her past earnings. The benefits are calculated by applying a progressive benefit formula to the worker's career-average earnings in Social Security-covered employment, adjusted for wage growth. The first step in calculating an individual's Social Security benefit is to determine his or her average indexed monthly earnings (AIME), a summarized measure of a worker's career-average earnings indexed (i.e., adjusted) to average earnings growth in the national economy. The next step is to compute the primary insurance amount by applying a progressive benefit formula to the AIME, which replaces a greater share of career-average earnings for low-paid workers than that for high-paid workers. Because the AIME is indexed to the average wage, the average benefits that new beneficiaries receive keep pace with growth in average earnings in the economy.
Social Security benefits may be adjusted based on several factors, including the age at which an individual first claims his or her benefit, whether an individual is receiving a pension from non-Social Security-covered earnings, and whether an individual continues to work and earn above a certain amount. 
In July 2018, the average monthly benefit for retired workers was $1,414.73. 
section_title: Social Security Financing
paragraphs: Social Security income and outgo are accounted for in two separate trust funds: the Federal Old-Age and Survivors Insurance (OASI) Trust Fund and the Federal Disability Insurance (DI) Trust Fund. Funding for these two trust funds comes from three different sources—payroll taxes, income taxes on a portion of Social Security beneficiaries' benefits, and interest income on Social Security trust fund balances. Payroll taxes include Federal Insurance Contributions Act (FICA) taxes and Self-Employment Contributions Act (SECA) taxes. The OASI and DI Trust Funds were credited with asset reserves of more than $2.89 trillion at the end of 2017.
section_title: Social Security Annual Cost-of-Living Adjustments
paragraphs: Social Security beneficiaries' monthly benefit amount is adjusted annually to maintain purchasing power over time. In October each year, the Social Security Administration announces the cost-of-living adjustment (COLA) payable in January of the following year. The Social Security COLA is a reflection of inflation measured by the Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W), calculated by the Bureau of Labor Statistics. The CPI-W, representing 29% of the population, is an estimate of the average change in prices of the goods and services purchased by households whose income is earned primarily from a clerical or wage occupation. The CPI-W gathers prices on thousands of items and services across the United States, including food, beverages, clothing, transportation, medical care, education, housing, recreation, and energy. An average CPI-W is calculated from these prices each quarter. The Social Security COLA equals the percentage increase in the average CPI-W from the third quarter of the base year (the last year for which a Social Security COLA was applied) to the third quarter of the current year. If the CPI-W indicates deflation, the Social Security COLA will equal 0.0% and Social Security benefits will not decrease. 
In most years since 1975, when the first COLA was applied to Social Security benefits, a COLA has been payable to beneficiaries. However, due to negative or low inflation, there have been several years recently with no (2010, 2011, and 2016) or a relatively low (0.3% in 2017) Social Security COLA. The Social Security COLA in 2018 was 2.0%.
section_title: Medicare
paragraphs: Medicare is a federal program that provides health insurance coverage for elderly and permanently disabled individuals. Medicare was established in 1965 under Title XVIII of the Social Security Act and is administered by the Centers for Medicare and Medicaid Services (CMS). 
Medicare consists of four main programs, or parts :
Part A (Hospital Insurance, or HI) covers inpatient hospital services, skilled nursing care, hospice care, and some home health services. Most individuals are entitled to premium-free Part A coverage. Individuals pay certain deductibles, co-payments, and other out-of-pocket expenses depending on the services used. Part B (Supplementary Medical Insurance, or SMI) covers physician services, outpatient services, and certain home health and preventive services. Enrollees pay a monthly premium, an annual deductible ($183 in 2018), and a 20% coinsurance rate for most services. Part C (Medicare Advantage, or MA) is a private plan option for beneficiaries that covers all Medicare Part A and Part B services, except hospice. Typically, MA plans offer additional benefits or require smaller co-payments or deductibles than Medicare Part A and Part B. Part D covers outpatient prescription drug benefits. Medicare Part D plans offer either standard coverage or alternative coverage , which must have actuarially equivalent benefits. Plans may also offer enhanced coverage for additional premiums. Enrollees pay a monthly premium, an annual deductible (set at a maximum of $405 in 2018 for standard coverage), and other cost-sharing requirements.
subsections: section_title: Medicare Eligibility
paragraphs: Similar to Social Security eligibility requirements, an individual is entitled to premium-free Medicare Part A coverage if he or she (or his or her spouse) is aged 65 or older, worked in covered employment, and paid Medicare payroll taxes for at least 40 quarters (10 years). Individuals aged 65 or older who are not entitled to premium-free Medicare Part A may enroll in the program but must pay a premium. Unlike Social Security, an individual may not claim Medicare benefits sooner than the age of 65 unless he or she has a certain disability. An individual does not need to be a Social Security beneficiary to be eligible for Medicare. 
Medicare Part B is a voluntary, premium-based program for individuals enrolled in Medicare Part A. Approximately 91% of those eligible for Medicare Part B are enrolled in 2018.
As an alternate option, any individual eligible for Medicare Part A and Part B benefits may choose to enroll in Medicare Advantage for coverage of those benefits. As of July 2018, approximately 36% of Medicare beneficiaries are enrolled in Medicare Advantage plans.
In general, anyone who is entitled to Medicare Part A and/or enrolled in Part B is eligible to enroll in Medicare Part D. As of July 2018, approximately 76% of those eligible are enrolled in Medicare Part D. 
section_title: Medicare Financing
paragraphs: Medicare is financed through two separate trust funds: the Hospital Insurance (HI) Trust Fund, which finances Medicare Part A, and the Supplementary Medical Insurance (SMI) Trust Fund, which finances Medicare Part B and Part D. For Medicare program costs attributable to beneficiaries enrolled in Medicare Advantage, funds are taken in appropriate proportions from the HI and SMI Trust Funds. The HI Trust Fund is funded primarily by payroll taxes, and the SMI Trust Fund is funded primarily through general revenue transfers and beneficiary premiums. 
section_title: Medicare Part B Premiums
paragraphs: Beneficiaries enrolled in Medicare Part B must pay premiums (or have premiums paid on their behalf). By law, individuals receiving Social Security benefits have their Medicare Part B premiums automatically deducted from their benefit checks. In 2017, approximately 75% of Medicare Part B enrollees (39.7 million) had their Medicare Part B premiums deducted from their monthly Social Security benefit checks. Those not receiving Social Security are billed by Medicare, usually on a quarterly basis. Individuals who are enrolled in Medicare Part B but do not receive Social Security may include individuals who are waiting to reach full retirement age (65-67 years of age) and individuals who spent their careers in employment that was not covered by Social Security, including certain federal, state, and local government workers.
Standard Medicare Part B premiums are set each year at a rate equal to 25% of average expected per capita Medicare Part B program costs for the aged for the year. Monthly Medicare Part B premiums are based on the estimated amount that would be needed to finance Medicare Part B expenditures on an incurred basis during the year. Therefore, changes in the Part B premium over time generally reflect the growth in total Part B expenditures. The expected program costs for the aged, that is, the monthly actuarial rate for the aged, is defined as one-half of the expected average monthly per capita program costs for the aged plus any contingency margin adjustments. The contingency margin is the amount set aside to cover an appropriate degree of variation between actual and projected costs in a given year. Since 2016, a $3.00 surcharge has been added to the standard monthly premium. The Medicare Part B premium is applied nationally and does not vary with a beneficiary's age, health status, or place of residence. The standard Medicare Part B premium is the premium amount paid by beneficiaries not held harmless (see " Medicare Part B Premiums for Those Not Held Harmless ") and not paying a high-income-related premium. 
The standard monthly Medicare Part B premium in 2018 is $134.00. This premium applies to individuals with a modified adjusted gross income (MAGI) of $85,000 or less and to couples with a MAGI of $170,000 or less. Enrollees earning more than those respective amounts pay higher premiums based on their income, as shown in Table 1 . 
Since 2007, high-income beneficiaries have paid higher premiums set to cover a greater percentage of Medicare Part B costs than the standard premium. Adjustments known as income-related monthly adjustment amounts are made to the standard Medicare Part B premiums for high-income beneficiaries, with the share of expenditures paid by beneficiaries increasing with income. This share ranges from 35% to 80% of the projected per capita Medicare Part B expenditures (see Table 1 ). Those subject to a high-income-related premium are determined based on their MAGI and the most recent federal tax return provided to the Social Security Administration by the Internal Revenue Service. In 2018, individuals with a MAGI greater than $85,000 and couples with a MAGI greater than $170,000 are defined as high-income beneficiaries and pay an income-related monthly adjustment amount ranging from $53.50 to $294.60, based on income level. Approximately 6% of Medicare Part B enrollees (3.5 million individuals) pay high-income-related premiums in 2018. 
Low-income Medicare Part B enrollees may qualify for assistance with premiums and other out-of-pocket expenses through Medicare Savings Programs. Depending on an enrollee's income and the eligibility requirements of his or her state Medicaid program, a Medicare enrollee may be eligible for full Medicare and Medicaid benefits paid for by Medicaid through the Qualified Medicare Beneficiary program. Low-income Medicare Part B enrollees who do not meet their respective state's Medicaid eligibility criteria may be eligible to have their Medicare Part B premiums paid either by Medicaid, through the Specified Low-Income Medicare B eneficiaries program, or by the federal government, through the Q ualifying I ndividuals program. 
section_title: Medicare Part D Premiums
paragraphs: Each year, the Medicare Part D base premium is set at 25.5% of the expected per capita costs for standard prescription drug coverage. Beneficiary premiums are based on average bids submitted by participating drug plans for basic benefits (the base beneficiary premium) each year and are adjusted to reflect the difference between the standardized bid amount of the plan the beneficiary enrolls in and the nationwide average bid. The actual cost of coverage and premiums, however, varies by plan. Medicare Part D enrollees may pay premiums to their plans directly or may have premiums automatically deducted from their Social Security benefits. 
In 2018, the Medicare Part D base premium is $35.02. However, as noted, actual premiums vary by plan and the average Medicare Part D premium, weighted for enrollment, is $41.00. 
Since 2011, high-income Medicare Part D enrollees have paid Medicare Part D premiums higher than the Part D base premium. Those subject to a high-income-related premium are determined based on their MAGI, using the same income thresholds as Medicare Part B income-related premiums. The income -related monthly adjustment amount (IRMAA) is calculated as the difference between the Medicare Part D base beneficiary premium (which represents 25.5% of the average national bid amount) and 35%, 50%, 65%, or 80% of the national average cost for providing Medicare Part D benefits. The surcharge is based on beneficiary income, with higher-income beneficiaries facing a larger monthly premium adjustment. The amount of the Medicare Part D high-income-related premium is determined using the Medicare Part D base premium, and the IRMAA calculated from this is added onto the Medicare Part D enrollee's actual Part D premium.
Some Medicare Part D enrollees with low incomes and limited assets may qualify for premium and cost-sharing assistance. These low-income subsidies are offered on either a full or a partial basis, depending on an individual's level of income. Enrollees who are eligible for Medicaid, those eligible for one of the three Medicare Savings Programs for Medicare Part B assistance, and those eligible for Supplemental Security Income assistance are automatically eligible for full low-income subsidies , which cover the cost of the monthly premium and the annual deductible and also reduce cost sharing. Individuals who do not qualify for one of the above programs and have incomes below 150% of the federal poverty level (FPL) and limited assets may be eligible for a partial subsidy. These individuals pay a percentage of the base beneficiary premium on a sliding scale based on income as well as a reduced deductible ($83 rather than the maximum $405 in 2018) and reduced cost-sharing amounts. 
section_title: Social Security Benefits and Medicare Part B Premiums from 2000 to 2018
paragraphs: Social Security benefits and Medicare Part B premium amounts are adjusted annually using different methods, which typically has resulted in a higher percentage increase in Medicare Part B premiums than in Social Security benefit increases. Specifically, Social Security benefits are adjusted for inflation annually by COLAs. The Social Security COLA is a measure of general inflation based on the CPI-W. By contrast, Medicare Part B premiums are adjusted annually to account for changes in Medicare program expenditures for covered medical services. Medicare Part B premiums represent a percentage of the actual costs of the program, and thus premiums rise as health care costs rise. The annual percentage increase in Social Security benefits and Medicare Part B premiums for years 2000 to 2018 is shown in Figure 1 . 
Since 2000, Social Security COLAs have ranged from 0.0% to 5.8% with an average Social Security COLA of 2.2%. There was no Social Security COLA increase in 2010, 2011, or 2016 and only a relatively small (0.3%) Social Security COLA in 2017. 
Although Medicare Part B premium changes also have varied from year to year, there is a general trend of increasing premiums paid by beneficiaries. Standard Medicare Part B premium changes have ranged from -13.4% to 17.4% since 2000, with an average increase of 6.1%. The 13.4% decline in the standard Medicare Part B premium in 2012 occurred primarily as a result of a large number of individuals no longer being held harmless because of the 3.6% COLA following two years of 0.0% COLAs. The 3.6% COLA allowed for the full amount of the previous years' premium increases to be spread to most beneficiaries, rather than the minority of beneficiaries not held harmless during the 0.0% COLA years (see " Hold-Harmless Provision for Medicare Part B Premiums "). Other than the years in which there was no Medicare Part B premium increase (2000, 2009, 2012, 2014, 2015, and 2018), increases in Medicare Part B premiums historically have been greater than the Social Security COLA increases. 
Since 2000, the Social Security annual COLA has resulted in a cumulative benefit increase of approximately 50%, considerably less than the Medicare Part B premium growth of close to 195%.
section_title: Hold-Harmless Provision for Medicare Part B Premiums
paragraphs: A hold- harmless provision in the Social Security Act prevents certain Social Security beneficiaries' benefit amount from decreasing from one year to the next due to an increase in standard Medicare Part B premiums. If, in a given year, the increase in the standard Medicare Part B premium would cause a beneficiary's Social Security check to be less, in dollar terms, than it was the year before, the Medicare Part B premium is reduced to ensure that the nominal amount of the individual's Social Security check stays the same.
The number of individuals held harmless can vary widely from year to year, depending on annual inflation rates and projected Medicare Part B program costs. In a typical year, few individuals are held harmless. However, in years in which there is no Social Security COLA, many individuals may be affected by this provision. For example, there was a 2% Social Security COLA in 2018 and 28% of Medicare Part B enrollees were held harmless. By contrast, in 2016, there was no Social Security COLA and 70% of Medicare Part B enrollees were held harmless from the standard Medicare Part B premium increase.
The hold-harmless provision does not apply to Medicare Part D premiums. Therefore, a beneficiary is not held harmless if the increase in his or her Medicare Part D premium or the combined increase in Medicare Part B and Part D premiums causes his or her Social Security check to decline. In other words, an individual's Social Security check may decrease as a result of a Medicare Part D premium increase.
subsections: section_title: Groups Not Covered by the Hold-Harmless Provision
paragraphs: Several groups are not covered by the hold-harmless provision. The following groups may receive reduced Social Security benefit payments due to Medicare premium increases that are greater than the Social Security COLA:
New enrollees to either Medicare or Social Security; Medicare Part B enrollees who do not receive Social Security benefits; High-income individuals who pay income-related Medicare Part B premiums; Low-income beneficiaries who are in a Medicare Savings Program (Medicaid typically pays the premiums on their behalf).
Medicare Part B enrollees who do not receive Social Security may include individuals who spent their careers in employment that was not covered by Social Security, including certain federal, state, and local government workers. This includes civilian federal employees who were hired before 1984 and are receiving Civil Service Retirement System (CSRS) benefits. Although CSRS benefits are increased annually by the same COLA applied to Social Security benefits, the benefits are not Social Security benefits and thus its beneficiaries are not protected under the hold-harmless provision. 
section_title: Medicare Part B Premiums for Those Held Harmless
paragraphs: Whether a beneficiary is held harmless or not depends on the amount of the standard Medicare Part B premium increase relative to the amount of his or her Social Security COLA in a given year. 
The Medicare Part B premium an individual pays when held harmless may affect his or her future Medicare Part B premium amounts. For example, an individual held harmless in a year with no Social Security COLA may pay an increase in Medicare Part B premiums in a later year in which he or she is not held harmless, even if the standard Medicare Part B premium does not increase. 
As an illustration, Table 2 shows how the activation of the hold-harmless provision might affect future Medicare Part B premiums for a hypothetical individual who retired in 2008, receives an average Social Security benefit amount, and is eligible for the hold-harmless provision beginning in 2009. For example, in 2012, the standard Medicare Part B premium decreased by $15.50, yet the Medicare Part B premium paid by this hypothetical individual, who would have been held harmless in 2010 and 2011 but not in 2012, would have increased by $3.50 from the premium he or she would have paid in 2011 ($96.40) to the standard Medicare Part B premium of $99.90 in 2012. A similar situation would have occurred in 2018. In 2018, the standard Medicare Part B premium remained the same as the 2017 standard Medicare Part B premium, yet the Medicare Part B premium paid by this hypothetical individual, who would have been held harmless in 2017 and previous years but not in 2018, would have increased by approximately $25.30 from the premium he or she would have paid in 2017 ($108.70) to the standard Medicare Part B premium of $134.00 in 2018. 
section_title: Medicare Part B Premiums for Those Not Held Harmless
paragraphs: As noted earlier, certain individuals receiving Social Security benefits and those not receiving Social Security benefits are not protected under the hold-harmless provision. However, by law, standard Medicare Part B premiums are calculated to cover 25% of the expected costs of Medicare Part B program costs. In years in which a large number of individuals are held harmless and pay reduced premiums, aggregate Part B premiums may not cover 25% of costs unless the entire share of a premium increase is shifted onto those not held harmless. Thus, in certain years, those not held harmless may bear the burden of meeting the 25% requirement disproportionately. For example, in 2010 there was no Social Security COLA and approximately 70% of Medicare Part B enrollees were held harmless from the Medicare Part B premium increase. Those who were held harmless, on average, paid a Medicare Part B premium of $96.40 (the 2009 standard Medicare Part B premium rate) whereas Medicare Part B beneficiaries not held harmless paid the 2010 standard Medicare Part B premium of $110.50 (or higher if paying a high-income-related premium). 
As an additional illustration, in 2016, there was no Social Security COLA but there was a Medicare Part B premium increase, causing approximately 70% of Medicare Part B beneficiaries to be held harmless from the Medicare Part B premium increase. In order for premiums to cover 25% of expected per capita expenditures (as is typical), the cost increase would have been shifted to those not held harmless. The Medicare Trustees estimated that, in this scenario, the premiums for those not held harmless in 2016 would therefore need to have increased to approximately $159.00 per month (approximately a $54.10 increase from the 2015 standard Medicare Part B premium of $104.90). In anticipation of this large premium increase that would have been paid by those not held harmless in 2016, the Bipartisan Budget Act of 2015 (BBA 15, P.L. 114-74 ) altered the Medicare Part B premium calculation methods for 2016. In that year, the standard Medicare Part B premium (paid by those not held harmless) was calculated as if all enrollees were paying the same annually adjusted standard premium (i.e., as if the hold-harmless provision were not in effect). As a result, the standard Medicare Part B premium paid by those not held harmless in 2016 was $121.80 (or higher if paying a high-income-related premium).
Low-income beneficiaries who receive premium assistance from Medicare Savings Programs are not held harmless. However, because they do not pay the Medicare Part B premium—Medicaid will typically pay low-income beneficiaries' Medicare Part B premium—the costs of low-income beneficiaries' rising Medicare Part B premiums generally would be borne by Medicaid rather than by the beneficiaries themselves. 
section_title: Projected Impact of Medicare Premium Growth on Social Security Benefits
paragraphs: Medicare per capita cost growth is expected to continue to increase at a faster rate than inflation measured by the CPI-W, thus increasing Medicare premiums at a faster rate than Social Security COLAs. The Medicare Trustees project that Medicare beneficiaries will use a larger portion of their Social Security benefits to pay Medicare Part B and Part D premiums in the future. For example, in 2018, the Medicare Part B and Part D premiums account for 12.4% of the average Social Security benefit; the Medicare Trustees project that this will increase to approximately 14.0% in 2028 and to 16.8% in 2092. Out-of-pocket costs are also expected to continue to absorb an increasing amount of the average Social Security benefit; the Medicare Trustees project that out-of-pocket costs as a percentage of the average Social Security benefit will increase from approximately 23.6% in 2018 to approximately 26.9% in 2028 and to approximately 34.5% in 2092.
The historical and estimated increases in average Social Security benefits, the average Medicare Part B and Part D benefits, average Medicare Part B and Part D premiums, and average out-of-pocket costs as indicated by the Medicare Trustees' long-range projections are shown in Figure 2 .