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. 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. 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. 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. 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. 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%. 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. 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.