Throughout the United States, many Americans, including seniors, are struggling financially right now due to efforts to halt the spread of the novel coronavirus. COVID-19, the disease caused by the virus, has resulted in lockdowns, sent the country into a recession, and caused unprecedented stock market volatility.
In response to the economic uncertainty, U.s. lawmakers have passed multiple stimulus bills, and they're currently negotiating another one. Recently, the Republicans put forth a plan called the Health, Economic Assistance, Liability Protection and Schools Act, or HEALS Act, to offer additional financial relief. This Act would, among other things, provide a second stimulus check to millions of Americans.
But that's not the only assistance it provides to Social Security retirees; it also offers a little extra financial relief for beneficiaries.
The HEALS Act would freeze Medicare Part B premiums
Medicare Part B provides insurance coverage to more than 60 million Americans, most of whom are elderly. However, it's not a free program; seniors have to pay premiums for coverage as well as cover deductibles before the insurance kicks in. In 2020, the standard premium paid by most seniors is $144.60 a month, although some higher-income seniors pay more.
Premium prices for Medicare Part B have gone up every year since 1966. They jumped $9.10 per month from 2019 to 2020, for example. But the HEALS Act would stop premiums or deductibles from increasing in 2021.
If this year's prices are locked in and costs don't rise in January as they normally would, Medicare beneficiaries would avoid substantial increases to both premiums and deductibles that are expected to result from the economic conditions coronavirus caused.
Under the HEALS Act, seniors would have to pay an extra $3 monthly surcharge until the shortfall resulting from keeping premiums steady has been recovered. But still, this is expected to be less costly than the premium and deductible increases would've been.
How locking in Medicare premiums helps Social Security beneficiaries
Obviously, freezing Medicare premiums and deductibles help seniors because they won't have to pay more for medical care.
But the provisions of the HEALS Act that lock in this year's Medicare Part B premiums may be especially valuable to Social Security retirees next year since they may only get a small cost-of-living adjustment (COLA) or potentially no cost of living adjustment in 2021 thanks to the coronavirus' impact on the economy.
See, most people on Social Security have their Medicare premiums taken directly out of their Social Security checks. And if they get only a small annual raise to their benefits (or none at all), Medicare premiums may go up more than their retirement income does.
When that happens, hold harmless provisions ensure Social Security benefits can't drop for most retirees. So, for example, if you get a $9 raise but Medicare premiums go up $10, your monthly checks won't go down by $1. But your entire COLA would disappear in this case to cover $9 of the $10 extra that Medicare costs (and if you got a larger raise in subsequent years, you'd lose some of that increase too since you'd have to catch back up to paying the standard premium). Plus, those not protected by hold harmless provisions could see really substantial increases in premium costs next year that reduce their income more significantly.
Sadly, Social Security benefits are already losing buying power, and seniors may be more reliant on them than ever if they don't want to take money out of their investment accounts during these turbulent times. Losing whatever COLA they get due to rising Medicare premiums would only serve to make their financial situation worse.
Will the HEALS Act pass?
There's no guarantee the HEALS Act will pass and, in fact, many Democrats have objected to some of the key components of the GOP's proposal.
However, it's likely lawmakers will eventually find some compromise so they can pass a coronavirus relief bill. And protections from rising Medicare premiums will likely be included since it's an idea with bipartisan support.
There's a lot of conflict in Washington over how to proceed, so there's still a chance no action will be taken and seniors could be left to cope with rising medical expenses. To help ensure you're prepared for this possibility, it's a good idea to shore up your emergency fund now. You'll also want to make sure you aren't taking on too much risk in a volatile stock market and that you have some liquid cash to cover your costs in the short-term. That way, you aren't forced to sell investments at a loss to pay your bills if the market crashes again due to COVID-19.