How The 'Hold Harmless' Rule Protects Retiree Benefits

The medical insurance arena has countless moving parts that require more than a little effort to understand. Funding the healthcare needs of millions of Americans is no easy feat, and it's something that gets more expensive with each passing year. As of 2024, the Centers for Medicare and Medicaid Services (CMS) report the standard monthly premium for Medicare Part B users was $174.70, a little less than $10 up from the previous year. You can generally expect to see your premiums rise by a small margin each year, something that falls in line with the inflation of everyday goods and services more broadly. But unlike a lot of other needs, there is one regulation that helps prevent the cost of Medicare coverage from running out of control: The hold harmless rule ensures that your premium increases can't rise by more than the cost of living adjustment to your Social Security benefits each time the calendar turns over.

Generally, Medicare coverage and Social Security benefits go hand in hand — Medicare was even launched under the umbrella of the Social Security Administration. Most Americans won't pay their premium directly. Instead, they'll see it deducted from their Social Security benefits. This is where the provision kicks in to support a budget evolving throughout a beneficiary's retirement years.

As a practical matter, you'll need to have your premiums drawn directly from your benefit to qualify for coverage under this rule. Higher earners in retirement are also ineligible: In 2025, that means individual filers with modified adjusted gross incomes (MAGI) above $105,999 and joint filers with a MAGI above $211,999. If you do qualify, you won't see your Social Security benefit lowered when January rolls around and pricing changes take effect. The COLA you get on your checks boosts the value of your benefit annually, attempting to track with inflation. However, Medicare premiums also tend to rise, and without the hold harmless rule in place, it might ultimately mean that beneficiaries end up with less money in their accounts each month as medical costs outpace benefit increases.

The result is a keystone protection that ensures your medical treatment expenses through Medicare don't ultimately make you worse off in the new year. This is crucially important since medical costs frequently tend to trend upward all on their own as people age. The result could otherwise deliver a compounding effect that creates an increasingly vulnerable financial position for people already living on fixed incomes. As a side effect, this rule can also help retirees better manage their potential tax liability. By limiting the impact on Social Security benefits, this rule reduces the need to continually lean harder on other savings. Without this provision in place, many retirees might gradually come to draw on their 401(k) and other taxable accounts with increasing volume.