Medicare Part B premium increase in 2012 likely to fully offset Social Security COLA projected at 1.2%. This is a good lesson for anyone planning on retiring.
According to the Trustees projections, Social Security recipients may see a 1.2% cost of living adjustment in their monthly benefit in 2012. However, that increase will quickly disappear thanks to growing Medicare premiums.
The “hold harmless” provision which states that the Social Security benefit can’t decrease as a result of a Part B premium increase assures that most Americans receiving Social Security will not see their benefit go down, but neither will the benefit increase, for the third year in a row.
Higher income beneficiaries are not protected by the hold harmless provision and will see an increase in Medicare premiums and a resulting decrease in their net Social Security benefit.
Those new to Social Security and Medicare in 2012 will see the effects of all Part B premium increases over the last three years.
If you would like to see a more detailed explanation of all this check out the Kaiser Family Foundation Report.
Individuals paying for Medigap coverage or for employer based Medicare supplemental coverage will see a further reduction in their net income as a result of increases in those premiums.
There is a lesson to be learned here for those who are not yet retired. Health care costs and premiums will continue to consume an ever-increasing portion of your retirement income and those costs are largely income insensitive meaning that if you have a retirement income of $30,000 or $300,000 your health care costs will be very much the same. The time to plan for this is now, now, now!
October 4, 2011 Update
NOTE: SINCE THIS WAS WRITTEN THE PROJECTED SOCIAL SECURITY COLA HAS INCREASED TO 3.5%. DEPENDING ON THE 2012 PART B PREMIUM, A HIGHER COLA MEANS FEWER PEOPLE WILL SEE A FULL OFFSET OF THEIR SOCIAL SECURITY INCREASE