Over the past five years, Part B costs have increased an average of 8.3% per year, and the Centers for Medicare and Medicaid Services (CMS) Office of the Actuary (OACT) projects an annual increase of 4.8% over the next five years based on current law. These subsidies are paid by the federal-state Medicaid program. Social Security beneficiaries who do not pay Medicare Part B premiums include those who are under the age of 65, receive low-income assistance from Medicaid to pay the Part B premium, have started to receive Social Security disability insurance (SSDI) but are not eligible for Medicare Part B because they have not received SSDI for 24 months, or chose not to enroll in Medicare Part B. Hold Harmless Provision for Increases in Part B Premiums

A hold harmless provision reduces the Part B premium for most beneficiaries whose Social Security COLAs are not sufficient to cover the standard Part B premium increase. If, in a given year, the increase in the standard Part B premium would cause a beneficiary's Social Security check to be less than it was the year before, the premium is reduced to ensure that the amount of the individual's Social Security check does not decline. Whether a beneficiary is held harmless also depends on whether the beneficiary has a previous history of paying Part B premiums and receiving Social Security: to be held harmless in a given year, a Social Security beneficiary must have received Social Security benefit checks in both December of the previous year and January of the current year, and must also have had Part B premiums deducted from both checks. The following groups are not affected by the hold harmless provision. In 2009, 17.5% of Part B enrollees received full Part B subsidies, but this number was expected to increase because of the economic downturn. About 5% of Part B enrollees are subject to income-related premiums. Part D premiums are not covered by the hold harmless provision, although beneficiaries with low-income subsidies will not be affected. Typically, the hold harmless provision has affected a relatively small number of beneficiaries and has had minimal impact on Part B financing. However, there was no Social Security COLA in 2010 and SSA announced on October 15, 2010, that there will be no Social Security COLA in 2011. Impact on Beneficiaries

			Most Beneficiaries Will Be Held Harmless

Although Part B premiums have increased but Social Security benefits have not, about three-quarters of Part B enrollees are held harmless for the increase in Part B premiums. As described above, about 27% of Part B enrollees are not held harmless in 2010 under current law. Persons who are not held harmless include lower-income beneficiaries whose premiums are paid by Medicaid, higher-income beneficiaries who pay income-related Part B premiums, new enrollees to either Medicare Part B or Social Security, and persons who do not receive Social Security checks. Because roughly three-quarters of Part B enrollees were held harmless in 2010, the entire increase in beneficiary costs was borne by the remaining one-quarter. As a consequence of the introduction of an income-related premium and the hold-harmless provision combined with no COLA in 2010, the number of different amounts that beneficiaries paid for the monthly Medicare Part B premiums increased from one in 2006 (when everyone paid the same amount, regardless of when he or she became eligible for Medicare or what his or her income was) to six in 2010: one for beneficiaries held harmless at the 2009 level, one for new beneficiaries and those without hold-harmless protection in 2010, and four levels of income-related premiums. 1832 , the Medicare Prescription Drug Affordability Act of 2009, which would amend the Social Security Act to limit the increase in premium costs for beneficiaries under the Medicare prescription drug program to no more than the Social Security cost-of-living adjustment, among other provisions. Most of these bills do not directly address the issue of Part B premiums but rather focus on payments to Social Security beneficiaries, veterans, and retired railroad workers. The Social Security Administration (SSA) scored H.R. In October 2010, Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid announced their support for consideration of a one-time, $250 payment to Social Security and certain other beneficiaries when Congress returns after the November elections. On October 15, 2010, the White House press office announced that the President supports efforts to provide a $250 payment to seniors, veterans, and people with disabilities.
On October 15, 2010, the Social Security Administration announced there will be no Social Security cost-of-living adjustment (COLA) in 2011. In addition, there was no Social Security COLA in 2010. The last positive Social Security COLA took effect in January 2009 and was 5.8% for all of 2009. Meanwhile, over the past five years, Medicare Part B program costs have increased an average of 8.3% per year and are expected to continue to grow. By statute, Part B premiums, which are automatically deducted from Social Security checks for those who receive Social Security, must cover 25% of projected Part B costs for aged beneficiaries. The Social Security Act includes a provision that holds most Social Security beneficiaries harmless for increases in the Medicare Part B premium: affected beneficiaries' Part B premiums are reduced to ensure that their Social Security checks do not decline from one year to the next. In a typical year, the hold harmless provision affects a small fraction of beneficiaries and has a limited impact on program finances. However, in a year when Medicare Part B premiums increase but Social Security benefits do not, the effects of the hold harmless provision are larger and more complex.
The absence of a Social Security COLA affects Medicare Part B premiums in two ways under current law. For about three-quarters of Part B participants, the hold harmless provision prevents their Part B premiums from increasing and so the amount of their Social Security checks remains flat, all other things being equal. Under current law, the only way to collect the 25% of Part B costs that are required to be covered by beneficiary premiums is to increase Part B premiums on beneficiaries who are not protected by the hold harmless provision. The one-quarter of beneficiaries who are not held harmless therefore shoulder the entire beneficiary share of the increase in Part B costs. In other words, their collective premium increase can be nearly four times greater than if there were no hold harmless provision.
The one-quarter of Part B enrollees to whom the hold harmless provision does not apply can be divided into three groups: (1) low-income beneficiaries whose Part B premiums are not withheld from their Social Security benefits but instead are fully paid by the Medicaid program (currently about 17.5% of Part B enrollees, expected to increase); (2) high-income beneficiaries who are subject to income-related Part B premiums (about 5% of Part B enrollees); and (3) beneficiaries for whom there is insufficient history of Social Security payments with corresponding deductions for the Part B premium (about 5% of Part B enrollees), which would include both new enrollees to either Social Security or Medicare and Part B enrollees who do not participate in Social Security. The substantial majority of Part B enrollees (17.5%) not held harmless in 2010 were low-income beneficiaries whose Part B premiums are paid by Medicaid. As a result, in the absence of any intervention by Congress, most of the cost of the increase in Part B premiums in 2010 and 2011 will be paid by the federal-state Medicaid program, not directly by beneficiaries.
As of the date of this report, Congress has not passed legislation to address this issue. Speaker of the House Pelosi has announced that she will ask the House to consider H.R. 5987, which would provide a one-time, $250 payment to Social Security beneficiaries (including persons on Social Security disability) and retired veterans and railroad workers, when Congress returns after the November elections. Senate Majority Leader Reid has announced he will ask the Senate to consider legislation to provide a one-time, $250 payment when Congress returns after the elections. On October 15, 2010, the White House press office announced that the President supports efforts to provide a $250 payment to seniors, veterans, and people with disabilities.