Many Americans count on every penny they get from Social Security to help them make ends meet in retirement. That makes it especially welcome when recipients get a bigger benefit check, as it seems to take away at least some of the pressure on budgets that most seniors face. Yet when those bigger checks turn out to be too good to be true, as happened recently, the fallout can be even tougher to handle.
Late last month, the Social Security Administration (SSA) discovered that it had made an error in how it coordinates with the Medicare program. The result was that Social Security recipients got checks that were bigger than they should've been. Now, the federal government is warning those on Social Security that some of them will see big bills from their Medicare providers, and that could put immense pressure on cash-strapped seniors to figure out how to cover the shortfall.
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How Social Security and Medicare are supposed to work together
Social Security and Medicare coordinate their two programs in several ways. Many retirees apply for Medicare and Social Security at the same time, and enrollment in Medicare is automatic for most of those who started receiving Social Security benefits before turning 65.
Medicare charges premiums for some of its services, and in general, if you're on Social Security, you can expect your Medicare premium to get deducted directly from your check. So, if you're entitled to $1,200 in monthly benefits and you have to pay a monthly premium to Medicare for $135.50, then you'll get a net Social Security payment of $1,064.50.
What went wrong
The problem that occurred at the beginning of 2019 affected hundreds of thousands of Social Security recipients. The SSA said that a processing error in January resulted in some participants in Medicare Advantage plans and Part D prescription drug plans not having their monthly premiums withheld from their Social Security benefits. Because of this, benefit checks were larger than they would've been if the proper withholding had been done. In addition, the private insurance companies that operate Medicare Advantage and Part D plans never received payment for the required premiums.
The SSA said that the plans themselves will send out bills for the unpaid premium amounts. It warned that because the problem went for five months without being detected, the first bill will be large, covering all the missed months of premium payments.
The Department of Health and Human Services (DHHS) weighed in on the problem as well, making it clear that participants have rights. Plans must offer their participants a grace period to repay the premium payments that were missed, with the length of the period being at least as long as whatever delay in billing there was.