	Introduction

Social Security and Medicare assist in providing financial security to most elderly and disabled individuals in the United States. 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. Congress has acted several times to protect beneficiaries from the impact of large Medicare Part B premium increases. Medicare

Medicare is a federal program that provides health insurance coverage for elderly and permanently disabled individuals. Since 2007, high-income beneficiaries have paid higher premiums set to cover a greater percentage of Medicare Part B costs than the standard premium. Medicare Part D Premiums

Each year, the Medicare Part D base premium is set at 25.5% of the expected per capita costs for standard prescription drug coverage. Social Security Benefits and Medicare Part B Premiums from 2000 to 2018

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. 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%. Hold-Harmless Provision for Medicare Part B Premiums

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. The hold-harmless provision does not apply to Medicare Part D premiums. 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). However, by law, standard Medicare Part B premiums are calculated to cover 25% of the expected costs of Medicare Part B program costs. Thus, in certain years, those not held harmless may bear the burden of meeting the 25% requirement disproportionately. Projected Impact of Medicare Premium Growth on Social Security Benefits

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. 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 .
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.