Medicare Hold Harmless Provision: What It Is, How It Works

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

Anthony Battle is a CERTIFIED FINANCIAL PLANNER™ professional. He earned the Chartered Financial Consultant® designation for advanced financial planning, the Chartered Life Underwriter® designation for advanced insurance specialization, the Accredited Financial Counselor® for Financial Counseling and both the Retirement Income Certified Professional®, and Certified Retirement Counselor designations for advance retirement planning.

Regine Parrish is a finance professional whose career spans over a decade. Her expertise includes areas of tech, finance, and telecom. She is a former financial analyst for a major telecommunications company and currently fact-checks reviews of financial products and services.

1. What Is Medicare? How It Works, Who Qualifies, and How to Enroll
2. Do You Need All 4 Parts?
3. Eligibility Age
4. Part A Definition
5. Part B Definition

How Medicare Works

1. Medicare After Retirement
2. How Medicare Works If You're Not Retired
3. Medicare Hold Harmless Provision

Medicare Part D (Prescriptions)

1. Part D Definition
2. Avoid the Part D Premium Penalty
3. Creditable Coverage
4. Best Part D Providers

1. Medigap Definition
2. Medicare Supplementary Medical Insurance
3. Who Needs Medigap
4. Best Medigap Providers
5. Best Plan F Providers
6. Best Plan G Providers

Medicare Advantage (Part C)

1. Medicare Advantage Definition
2. Medigap vs. Medicare Advantage
3. Pitfalls
4. Best Medicare Advantage Plans

Medicare vs. Medicaid

1. Medicare vs. Medicaid: What's the Difference?
2. How Much Medicaid and Medicare Cost

What Is the Medicare Hold Harmless Provision?

The Medicare hold harmless provision limits the annual rise in Medicare Part B premiums deducted from Social Security benefits to no more than the cost of living increase provided to the beneficiary in a given year. This ensures that the dollar amount of the Social Security benefits paid out after deductions does not decline from one year to the next as a result of an annual increase in the Part B premium. The hold harmless provision limits the financial strain on Social Security recipients to a degree when Medicare costs rise.

Key Takeaways

• The Medicare hold harmless provision prevents a recipient's Social Security benefits from declining year-over-year as a result of an increase in deductions for the Medicare Part B premium.
• People who pay Part B premiums directly to Medicare, those whose premiums are paid by Medicaid, and others subject to premium surcharges based on income do not qualify for the hold harmless provision.
• To qualify, recipients must have Part B premiums deducted from Social Security benefits received in December of the prior year and January of the current year.
• The hold harmless provision compares the net amounts paid out after premium deductions, ensuring the monthly payouts in January and the remainder of the year are no lower than during the prior year.

Understanding the Medicare Hold Harmless Provision

The Medicare hold harmless provision is a statutory restriction that prevents Medicare from raising most Social Security recipients’ Medicare Part B premiums by more than the cost of living adjustment (COLA) provided by Social Security in a given year. The Social Security Administration (SSA) cost of living adjustment was 8.7% for 2023.

Meanwhile, the Centers for Medicare and Medicaid Services (CMS) sets the standard premium for Medicare Part B insurance annually.

The standard monthly premium for Medicare Part B is $174.70 for 2024. The annual Part B deductible is $240 for 2024.

By law, Medicare must collect a portion of its Part B costs from beneficiaries. Because low COLA increases may limit the share of the costs offset by the standard premium, they can impose an increased burden on the high earners not eligible for relief under the hold harmless provision.

Requirements for the Hold Harmless Provision

To qualify for protection under the Medicare hold harmless provision in a given year, you must have Part B premiums deducted from the Social Security payments you receive in December of the prior year as well as January of the current year. The Social Security Administration ensures that the monthly payout does not decline as a result of an increase in Party B premiums for those covered by the hold harmless provision.

The provision does not apply to those who make payments for Part B insurance directly to Medicare and those who have premiums paid by Medicaid.

Income-Related Monthly Adjustments

Also not eligible for the hold harmless provision are the approximately 7% of Part B participants who pay premium surcharges known as income-related monthly adjustments because their income exceeds a threshold set by Medicare. For 2024, that group includes individuals with a modified adjusted gross income (MAGI) above $103,000 and joint filers with a MAGI above $206,000.

Examples of Income-Related Monthly Adjustments

In 2024, beneficiaries who earn more than $103,000 but no more than $129,000 as single filers will pay an extra $69.90 as a monthly adjustment, in addition to the standard premium of $174.70, bringing their total premium to $244.60 per month. Single filers who earn at least $500,000 will pay an extra $419.30 per month, bringing their total monthly premium to $594.

Part B premium surcharges are based on modified adjusted gross income (MAGI) as reported on the beneficiary's federal tax return two years earlier. For example, the 2024 income-related monthly adjustments are based on MAGI in 2022.

Special Considerations

By law, Social Security cost of living adjustments are based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). COLAs compensate beneficiaries for the loss of purchasing power due to inflation. That means COLAs are a crucial "hold harmless" safeguard in their own right.

The Medicare hold harmless provision for Part B premiums only ensures Social Security benefits don't decline in nominal terms from one year to the next for most recipients as a result of increases in the premiums deducted from their monthly benefit checks. That means higher premiums can still erode the inflation protections afforded by COLAs, leaving retirees with less disposable income.

In years when the COLA falls to zero, as it did in 2015, the Medicare hold harmless provision shifts more of the cost-sharing burden to those ineligible for the provision’s protection.

How Much Will My Medicare Costs Increase Each Year?

The Medicare Part B standard premium, a key medical expense for beneficiaries, is set annually by the Centers for Medicare and Medicaid Services to cover 25% of the program's costs in the next year, as projected by the agency's actuaries.

Since program costs and projections fluctuate, the standard Medicare Part B premium does vary from year to year as well. In addition to premiums and deductibles, Medicare beneficiaries without Medigap coverage face out-of-pocket costs such as coinsurance and copayments.

How Can I Qualify for the Hold Harmless Provision?

In order to qualify, individuals must have their Medicare Part B premiums deducted from the Social Security payments they receive in December of the prior year and January of the current one. Those who pay Medicare premiums directly or pay higher premiums based on income do not qualify.

Is There Any Other Help Available for Medicare Premiums?

Medicare savings programs provide financial assistance for premiums and other program costs to about 20% of Medicare beneficiaries. To qualify, you must have income below certain limits, which can vary by state.

The Bottom Line

The Medicare hold harmless provision ensures that the value of Social Security income does not decrease for retirees by limiting the annual rise in Medicare Part B premiums. Retirement can sometimes be difficult to manage and budget for. The Medicare hold harmless provision seeks to reduce the financial strain for retirees.

1. Social Security Administration. "How the Hold Harmless Provision Protects Your Benefits."
2. Social Security Administration. “Latest Cost-Of-Living Adjustment.”
3. Centers for Medicare & Medicaid Services. "2024 Medicare Parts A & B Premiums and Deductibles."
4. Social Security Administration. "Premiums: Rules for Higher-Income Beneficiaries."
5. Medicare.gov. “Costs.”
6. Medicare.gov. "Part B Costs."
7. Social Security Administration. "Cost-of-Living Adjustments."
8. Congressional Research Service. "Medicare Part B: Enrollment and Premiums," Page 16.
9. Medicare.gov. "Medicare Savings Programs."

1. What Is Medicare? How It Works, Who Qualifies, and How to Enroll
2. Do You Need All 4 Parts?
3. Eligibility Age
4. Part A Definition
5. Part B Definition

How Medicare Works

1. Medicare After Retirement
2. How Medicare Works If You're Not Retired
3. Medicare Hold Harmless Provision

Medicare Part D (Prescriptions)

1. Part D Definition
2. Avoid the Part D Premium Penalty
3. Creditable Coverage
4. Best Part D Providers

1. Medigap Definition
2. Medicare Supplementary Medical Insurance
3. Who Needs Medigap
4. Best Medigap Providers
5. Best Plan F Providers
6. Best Plan G Providers

Medicare Advantage (Part C)

1. Medicare Advantage Definition
2. Medigap vs. Medicare Advantage
3. Pitfalls
4. Best Medicare Advantage Plans

Medicare vs. Medicaid

1. Medicare vs. Medicaid: What's the Difference?
2. How Much Medicaid and Medicare Cost

Medicare Supplement open enrollment only happens once, according to federal guidelines. Don’t miss out on your chance to buy a Medigap plan.

A health insurance deductible is the amount of money you must pay out of pocket each year before your insurance plan benefits kick in. Learn how health insurance deductibles work.

A health reimbursement arrangement (HRA) is an employer-funded plan that reimburses employees for medical expenses and, sometimes, insurance premiums.

A Health Savings Account (HSA) is an account for individuals with high-deductible health plans to save for medical expenses that those plans do not cover.

Medicare Supplement Plan F is a well-liked Medigap plan, but it’s not for new-to-Medicare recipients. Find out more about what it is and how it works.

Medicare Advantage open enrollment happens every year from January 1 through March 31. Use the time before open enrollment begins to research and compare your options.

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