Medicare’s Part B Increase Comes Out of Your $75 COLA First. The Hold-Harmless Rule Decides How Much You Keep
Your 2027 Social Security raise may look nothing like the headline number once Medicare gets involved, and a little-known protection rule is the only thing standing between some seniors and a smaller check than they have right now.
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In case you missed the news from the Social Security Administration, benefits are getting their largest increase in years in 2027. Come January, benefits will rise 3.6% once the upcoming cost-of-living adjustment, or COLA, takes effect.
Social Security recipients who are also enrolled in Medicare, however, may not get to keep that raise in full. That’s because Medicare Part B premiums are paid directly from benefits, and Part B costs are likely to rise.
How Part B increases impact Social Security COLAs
Based on today’s average retirement benefit, the 2027 COLA is expected to add $75 per month for the typical senior. But the number may differ quite a bit for seniors enrolled in Medicare.
As of this writing, we do not know what the standard monthly Medicare Part B premium will be. Last year, though, it increased by $17.90 per month.
The cost of Part B may not rise quite as much in 2027. But any increase will directly eat into seniors’ upcoming COLA. If the cost of Medicare Part B rises by $10 a month, for example, instead of getting a $75 boost, the typical Social Security recipient will see their monthly checks increase by $10.
Seniors have protection against larger Part B increases than COLAs
In the past, there have been years when Social Security benefits received only a modest COLA while the cost of Part B rose substantially. In situations like that, seniors could end up with their Part B premium hikes not only eroding their COLA completely, but also leaving them with a smaller benefit.
Thankfully, that can’t happen. Because of a hold-harmless provision, an increase in the cost of Medicare Part B cannot cause someone’s monthly Social Security benefit to shrink from one year to the next.
For example, let’s say Bob is eligible for a $12 increase based on that year’s Social Security COLA, but Medicare Part B goes up by $15 per month. That would technically leave Bob with a Social Security check that’s $3 smaller if it weren’t for the hold-harmless provision. Instead, Bob’s benefit would simply stay where it is.
Because the 2027 COLA is so generous, even a large increase in the cost of Part B should leave the typical senior with a decent boost to their Social Security checks. But it’s a good thing the hold-harmless provision exists for those years when COLAs are minimal and Part B premium hikes are substantial.
When to expect a 2027 update on Medicare Part B
Last year, the Centers for Medicare & Medicaid Services announced official costs for Part B in mid-November. So hopefully, seniors will have an answer soon enough.
Until then, if you collect Social Security, you may want to hold off on creating your 2027 budget until you have all of the numbers. And if you think you won’t be able to make ends meet easily based on your final net COLA, you may want to gear up for a few lifestyle changes.
That could mean returning to work in some capacity or cutting spending. Even though the upcoming COLA is fairly large, it may not be enough to improve your financial situation, especially if Medicare Part B ends up taking a big bite.
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Maurie Backman has more than a decade of experience writing about financial topics, including retirement, investing, Social Security, and real estate. Her work has appeared on sites that include The Motley Fool, USA Today, U.S. News & World Report, The Washington Post, and Kiplinger.
Prior to becoming a full-time financial writer, Maurie worked in the financial industry trading distressed debt. She then changed course and spent a few years designing electronic toys. After a stint in content marketing and UX, she shifted back into writing and has since covered everything from the housing market to estate planning to Medicare.
When she's not busy writing, Maurie can be found hiking, walking her dogs, driving her kids to their various sports practices and games, and curling up with a good book. She cooks on occasion and bakes way too often.
