Big Social Security COLA will be offset by Medicare premium rollercoaster

Retirees can look forward to the largest Social Security cost-of-living adjustment next year since 2012 – but don’t break out the champagne just yet. For many, higher Medicare premiums will take a big bite out of their raise.

The 2018 Social Security cost-of-living adjustment (COLA) will not be announced until October, but inflation trends point toward an increase of about 2 percent, according to a recent forecast by the Senior Citizens League. That would be a welcome change compared with the 0.3 percent bump in 2017, and 2016 when no COLA was made. (Updating October 13: The Social Security Administration formally announced a 2 percent COLA for next year).

COLAS are determined by an automatic formula tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). From 2013 to 2015, the annual increases have ranged around 1.5 percent.

For a retiree receiving the average monthly Social Security benefit of $1,360, a 2 percent raise would translate to an increase of $27.20. But for most beneficiaries, Medicare Part B premiums are deducted from Social Security. And the impact of the Part B premium on net benefits next year will vary due to what is known as the “hold harmless” provision governing Social Security.

By law, the dollar amount of Part B premium increases cannot exceed the dollar amount of the COLA – a feature that ensures net Social Security benefits do not fall. The hold harmless provision applies to the 70 percent of the Medicare population enrolled in both programs. Those not held harmless include anyone delaying their filing for Social Security benefits, but others affected include some federal and state government retirees. Affluent seniors who pay high-income Medicare premium surcharges also are not protected.

The stingy COLAs of the past two years are rare, and now they have set the table for an equally unusual situation for 2018. Learn more at Reuters Money.


  1. 2% is considered a “big COLA?” This inflation formula continues to screw us retired folks. Someone needs to do a study on what most seniors actually spend money on (and it’s not gasoline) and have the COLA connected to those expenses. I’m not old enough yet for Medicare but my health insurance has gone up over 60% over the past 2 years. Why is that not part of the formula?

  2. Couldn’t agree more with Tom. The COLA they use for seniors bears NO resemblance to my expenses. I have had to change my Medicare supplement to a different plan. Fortunately I don’t use many medications — a friend of mine in the donut hole needs $800 a month for her critical medications… so in order to eat, she doesn’t take her medications. Dear Congress: make COLA meaningful for seniors

  3. This is a rollercoaster for my clients every single year. It also makes explaining Medicare to people very confusing because we have some people paying $104.90, some people paying $109, a whole bunch of new enrollees paying $134, and then about a small percentage of clients paying more than $428/person for Part B because of their high incomes. All these changing premiums are very confusing for them and the COLA increases are so small. I dread having to explain another weird COLA/Part B premium year who have a hard time affording Medicare as it is.

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