The Hold-Harmless Rule: Why Medicare’s 2027 Premium Hike Can’t Touch Some Retirees’ Social Security Checks
A 3.6% raise sounds great until Medicare's Part B bill arrives and threatens to swallow it whole. For retirees with small checks, one long-standing rule decides whether that nightmare ever happens.
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When the Social Security Administration announced that benefits would receive a 3.6% cost-of-living adjustment (COLA) in 2027, many people were happy with the update. And if you’re one of them, you may be thinking, “Great! Now I can go ahead and calculate my 2027 raise.”
Well, not so fast. If you’re enrolled in Medicare, you may be aware that your Part B premiums are paid out of your Social Security benefits automatically. You may also be painfully aware that the cost of Medicare Part B tends to increase from one year to the next.
Now here’s the scary part. If your Social Security benefit is on the small side and the cost of Medicare Part B rises substantially, it’s conceivable that your entire COLA could get wiped out in 2027. But thankfully, your Social Security benefit cannot shrink from one year to the next thanks to a long-standing rule.
How the hold-harmless rule works
There have been years when Social Security’s COLA has been much smaller than 3.6%. During times like that, even a modest increase in the cost of Medicare Part B can wipe out a COLA completely.
The typical senior on Social Security does not have to worry about that happening in 2027. The average monthly benefit is slightly less than $2,100, and the typical retirement check is expected to increase by $75 once the 3.6% COLA takes effect in January.
Even if the cost of Medicare Part B rises by a pretty significant margin, an increase anywhere close to $75 per month is just plain unheard of. However, if you only collect a small Social Security benefit, it’s possible that the cost of Medicare Part B could increase enough that your entire COLA goes away.
For a $300 monthly benefit, for example, a 3.6% COLA amounts to an increase of about $11 in 2027. If the cost of Medicare Part B rises by $13 per month in 2027, it completely offsets the $11 increase.
But thanks to the hold-harmless rule, in this example, your monthly Social Security benefit would not be reduced by $2. The rule states that your Social Security checks can’t decrease from one year to the next because of an increase in the cost of Medicare Part B.
Stay tuned for a big announcement
If you’re frustrated that Medicare hasn’t announced an official Part B premium for 2027, you’re no doubt in good company. It’s common for Medicare to make that announcement later in November, so you may not have to wait too much longer.
Once you find out what Part B will cost, you should be able to calculate how much additional money you’ll get in your Social Security checks come January. And if you’re worried about affording your expenses, make sure to take advantage of Medicare’s annual open enrollment period, which is currently underway.
Between now and Dec. 7, current enrollees can make changes to their Medicare coverage, like switching Part D or Advantage plans. It’s smart to explore your plan choices if you’re having a hard time covering your costs and are looking for ways to save money.
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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.
