Social Security benefit checks could go down in 2010

While we won't have the official word on the annual cost-of-living increases (COLA) until mid-October, the Congressional Budget Office estimates that there will be no COLA increase for 2010 -- the first time without an increase in 35 years.

For most that also means there will be no increase for Part B premiums, but some will see an increase.

For all, whether or not their Social Security benefit checks go down will depend upon how private insurers price the Medicare Part D premiums (prescription benefits). If those premiums go up, as expected, the actual check Social Security recipients receive could go down.

Even if Medicare Part D premiums remain the same, about 25% of Social Security beneficiaries will net less cash thanks to expected increases in Medicare Part B benefits. Medicare Part B benefits, which cover doctor's visits and other outpatient services, must stay the same thanks to a "hold-harmless" clause of the federal law that forbids increases in Part B premiums when there is no COLA increase.
But, the hold harmless clause does not protect three classes of people:
  1. People who don't have the premium withheld from their Social Security checks.
  2. People who pay a higher Part B premium based on higher income.
  3. People newly enrolled in Part B.
For these beneficiaries the $96.40 premium charged in 2009 could increase to $119 per month in 2010, based on Congressional Budget Office projections. And, if the COLA remains zero in 2011 as expected, that amount could increase to $128 by 2012. For people whose incomes are above $85,000 per year Part B premiums -- which already were between $38.50 and $211.90 a month higher in 2009 -- could see even higher increases.

Most of the people who don't have Medicare Part B premiums taken out of their checks get their premiums paid under the state Medicaid programs, so they won't see an increase. Instead the states might have to pick up the higher tab.

The reason this smaller group of beneficiaries would have to pick up the tab is because by not raising the costs to a majority of Medicare beneficiaries there will likely be a shortfall in revenue for Medicare Part B that will need to be made up by the 25% who are not protected by the hold harmless clause.

We likely won't know the impact on Social Security benefits or how much people will pay for Medicare Part B or Part D until at least mid- to late-October when the Social Security Administration and the Centers for Medicare and Medicaid Services release the final numbers. Even at that time the full impact of any Medicare Part D increases won't be known for certain until open season for Part D plans begins in mid-November.

Lita Epstein has written more than 25 books including "The Complete Idiot's Guide to Social Security and Medicare" and "The Pocket Idiot's Guide to Medicare Part D."
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