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Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. I recently filed and suspended at my 66th birthday (my full retirement age). I am receiving no Social Security payments at this time. I pay for Medicare Part B via a quarterly check of about $312. With my monthly Medicare Part B payment projected to increase to $159 per month, is there anything I can do? What if I apply only for a spousal benefit on my wife’s account? Am I still eligible for a spousal benefit since I filed and suspended? I assumed that if I was receiving even a small SS payment, then I would not pay the higher amount for Medicare Part B premium in 2016. — Barnett

A: What a mess, right? Last week, Social Security officially confirmed there would be no annual cost-of-living increase (COLA) for beneficiaries in 2016. This hurts millions of retirees in two ways.

A zero COLA means that consumer prices actually dropped during the 12 months ended last month. But that’s not the reality most seniors face. Even though falling energy prices drove down overall inflation, the world where seniors live is one of rising food, housing, and, especially, health care prices. An experimental price index for older Americans shows their costs actually increased during this period.

The zero COLA means that Medicare cannot raise Part B premiums on roughly 70% of people whose premiums are deducted from their monthly Social Security payments. Because of what’ s called the “hold harmless” rule, Social Security recipients generally can’t be paid less in benefits from one year to the next. However, the other 30% of beneficiaries won’t be so lucky. This group includes seniors with above-average incomes, enrollees who will be new to Medicare next year, and beneficiaries who aren’t paying Part B through Social Security because they haven’t begun taking their retirement benefits. Their premiums are projected to rise more than 50% unless Congress or the White House can devise a workaround.

Furthermore, all Medicare beneficiaries would be on the hook for the same big percentage increase in their Part B annual deductible, to $223 from the current $147.

Now everyone is waiting to see if anyone in Washington can pull a rabbit out of a hat—and fast—to prevent these financially painful increases from taking effect. With the annual open enrollment period for changing Medicare insurance having already begun, it's a perfect storm for Medicare beneficiaries.

Now to your specific question. Social Security's hold harmless rule says that Part B premiums cannot be increased next year if doing so would result in lower Social Security net payments for people whose Part B premiums are deducted from their Social Security benefits. This applies to all benefits from which Part B premiums are deducted.

Read next: Seniors Won’t Get a Social Security Benefit Raise in 2016

However, this good news is not good news for you. That's because you've already filed for your Social Security retirement benefit. If you then filed for a spousal benefit, you would unsuspend your own Social Security and would no longer receive delayed retirement credits (DRCs). You'd also be viewed by Social Security as filing for two benefits at the same time. In your case, your retirement benefit would be greater, so you'd receive no spousal benefit at all.

A better strategy might be to unsuspend your retirement benefit by the end of October. By beginning your retirement benefits in November, your first Medicare Part B premium would be deducted from your December Social Security payment. This would get you in under the wire to be held harmless from any Part B premium increases in 2016. Then, early next year, you would again suspend your retirement benefit. This would resume your DRCs but, according to Social Security, still allow you to continue paying your lower Part B premium directly to Medicare.

Now, this is a lot of work to save $660, which is what paying that higher $159 premium next year would cost you. If you lost, say, four months of DRCs by this unsuspend-suspend strategy, it would reduce your maximum Social Security benefit by 2.67% for the rest of your life. That reduction likely would cost you a lot more than $650.

And, of course, there is still the possibility of that rabbit appearing and making all of this moot. Further, the return of COLAs in future years will allow Medicare to raise premiums on those held harmless, while reducing premiums for the people scheduled to get hammered next year. On the downside, if inflation remains low, we could be stuck with this hold harmless mess in 2017 or even beyond.

There also was no COLA in 2010 and 2011. (These three years of zero COLAs are, by the way, the only years with no COLAs since the mid-70s). This caused Part B premiums to be frozen for most Social Security recipients, while exposing those not held harmless to larger increases (although not nearly so large as the one that's looming for 2016).

So, while most people continued to pay a $96.40 Part B premium in 2010 and 2011, those not held harmless had to pay $110.50 a month for Part B in 2010 and $115.40 in 2011. The return of a COLA in 2012 caused the Part B premium for everyone to be set at $99.40 a month. It rose in 2013 to $104.90 and has stayed there since then.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, Get What’s Yours: The Secrets to Maxing Out Your Social Security and is working on a companion book about Medicare. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.