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No 2016 Social Security COLA – But Some Medicare Premiums Will Increase

Category: Financial and taxes in retirement

Note on Nov. 12: Final Medicare costs have been announced, which ended up slightly different than the preliminary predictions discussed in this article. See Final Medicare Part Premiums and Deductibles article. See also related article on how current Congressional bill ends the popular Social Security “File and Suspend” strategy for most people not already using this strategy.
October 28, 2015 – It hasn’t happened many times, but it is coming in 2016: there will be no Cost of Living Adjustment (COLA) for those receiving Social Security. That is due to the fact that the cost of living in the U.S. went down, “fueled” by falling energy and commodity prices. This is only the 3rd time in history there has been no COLA. The COLA in 2015 was 1.7%.

This news will undoubtedly disappoint many folks who look forward to a small increase in their monthly Social Security deposit, something they might view as a pay raise every year, although it is really only an adjustment to keep on pace with inflation (which seems to be in check, at least for the present).

Most will dodge a Medicare increase
Meanwhile in the Medicare world, most people will escape a Medicare bullet. Had there been a Social Security COLA increase, Medicare premiums for most recipients would have increased from $104.90 to $120.70. But a hold harmless provision of the law says that if there is no COLA adjustment, premiums for these people can’t go up. As currently estimated, 70% of beneficiaries won’t see any increase. However the Budget bill just passed by the House would reduce that to 15% of those in the program, if it goes on to be approved by the Senate and signed by the President.

The unlucky 15% include higher income beneficiaries and those in certain circumstances. Note that these amounts are not final yet – last minute action could change them. Your premiums will most likely go up if your situation fits these conditions:
– You start receiving Part B in 2016 (your initial Part B premium will be $120.70 per month plus a $3 surcharge)
– Your premiums aren’t deducted from your SS payments (You are eligible for SS, but have delayed claiming. Your initial Part B premium will be $120.70 per month plus a $3 surcharge)
– Your income is over $85,000 (or you are eligible for both Medicaid and Medicare). The amount of your increase depends on your income.

Higher income people’s premiums going up 52% or more
Unless Congress acts (and the bill under current consideration would reduce the number of people affected by this change to 15%) higher income recipients will get the double whammy – no SS increase and a big hike in Medicare premiums. Those could go over 50%, according to Kiplingers. Note: a couple will pay double these amounts if they end up being finalized:
– If a high earning individual’s income is makes over $85,000 to $107,000, the premium will go to $223 from $146.90 monthly.
– For individuals with incomes between $107,000 and $160,000, the new rate is $318.60
– Those with incomes between $160,000 and $214,000 will pay $414.20/month
– The monthly tab for those making up to $214,000 will pay $509.80 per person, up from $335.70 in 2015.

Bottom line
The decision to have no SS COLA in 2016 is set. See the final Medicare costs for 2016 announced in Nov.

For further reading:
What You Don’t Know About Social Security Could Hurt You (3 part series)
Now That You’re 65 – 10 Things You Need to Know (Part 1 in a series – includes how to sign up for Medicare)

Comments: Let us know if you have questions or concerns in the Comments section below.

Posted by Admin on October 27th, 2015


  1. I am in the second category – “Your premiums aren’t deducted from your SS payments (You are eligible for SS, but have delayed claiming. Your initial Part B premium will be $159.30 in 2016)” as i had planned to apply for SS at age 66.

    My question is, will everyone’s payment rise to $159.30 in 2016 or even 2017, meaning all this will be evened out in the end; OR my payments ALWAYS be that much higher than people who were receiving Medicare and having it deducted from their SS in 2015?

    If anyone can help, it would be greatly appreciated.

    by ella — October 28, 2015

  2. Sorry for the typo, i meant to say, “or will my payments always be … “

    by ella — October 28, 2015

  3. From JM:
    They already “means test” Medicare premiums. My wife and I are gonna be getting screwed by that one next year. Even if they only affect 15% of Medicare “beneficiaries” by that one, we will be in that 15%.
    I’d rather they just raise the tax rates but leave the Medicare premiums alone instead of “means testing” them. But of course, if they raised the tax rates they’d still screw us on the Medicare premiums.

    by Admin — October 28, 2015

  4. For my husband, this is very bad news – his 2014 income was unusually high due to a few outstanding sales – they will be using 2014 income to determine the Medicare rate. He is retiring on Jan 1 2016 and we will be watching our budget closely to make ends meet on our modest retirement income. How can they judge your ability to pay the increased premiums based on two year old income levels? Guess we will have to withdraw from our IRA to pay for the required part B, which of course means the funds will get taxed for withdrawing…double win for the government! Big loss for we retirees!

    by SandyZ — October 29, 2015

  5. The higher medicare premium makes no sense! Why are people (me included) being penalized for our age? In six months my Medicare premiums will come out of my Social Security. Presently, i’m not on soc. sec. Spoke to an agent yesterday and my area has no appointments until mid-December, and one payment has to be made before i’m considered on soc. sec. Therefore, i cannot get on soc. sec. before 2016; thus the higher Medicare premium.

    My cousin receives medical benefits through her husband’s employer. This new law is forcing her to apply for soc. sec. benefits seven months early; however she wouldn’t have needed Medicare for several years while her husband continues to work. She is actually saving the gov’t money, by not needing Medicare now; however all that will change as she is attempting to go on both soc. sec. and Medicare in December to avoid the higher Medicare premiums. How many others are in her position?

    Ludicrous! US gov’t, what are you thinking???

    by ella — October 29, 2015

  6. Ella, is the new law that is forcing your cousin to collect 7 months earlier because she doesn’t work?

    by DeyErmand — October 30, 2015

  7. DeyErmand, She’s rushing to get on Medicare and Social Secuity to avoid the higher Medicare rate. And yes, she’s not working at this time; but is receiving health benefits thru her husband who is working.

    by ella — October 30, 2015

  8. How soon can a person collect social security Ella?

    by DeyErmand — October 30, 2015

  9. DeyErmand, a person can start collecting Social Security benefits whenever they turn 62. However, a person isn’t eligible to receive Medicare benefits until they are 65. However, they may also receive Medicare benefits sooner depending upon whether they are disabled and/or if they have End-Stage Renal Disease.

    by Valerie — October 31, 2015

  10. Does anyone have new info AND understand the new medicare rates that were connected to the passing of the budget this week? Updates please!

    by SandyZ — October 31, 2015

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