Three Years Running: Why Medicare Premiums Are Outpacing Social Security COLA Growth—and What's Coming Next

The Compounding Squeeze on Retirees’ Purchasing Power

For millions of seniors relying on Social Security, the annual COLA adjustment has become less of a lifeline and more of a mirage. While their benefits officially increase each year based on inflation rates, a hidden cost is systematically eroding those gains before the money ever reaches their bank accounts.

The culprit? Medicare Part B premiums. And the math is becoming increasingly unfavorable.

Over the past three years, seniors have experienced a harsh reality: the cost of Medicare Part B coverage has climbed at a rate far exceeding their Social Security COLA increases. The disconnect is stark:

• 2024: Part B premiums rose 5.9% while COLA increased just 3.2%
• 2025: Part B premiums rose 5.9% again while COLA grew only 2.5%
• 2026: Part B premiums jumped 9.7% compared to a 2.8% COLA bump

When you add it up, Part B premiums have increased 23% cumulatively over three years, while Social Security COLAs have only risen 8.7%. The gap isn’t closing—it’s widening.

Why Medicare Costs Keep Climbing Faster Than Overall Inflation

The mechanism behind this squeeze isn’t intentional discrimination against seniors. Rather, it reflects a structural reality: medical care costs are escalating at a pace that outstrips general inflation across the economy.

Medicare Part B, which covers physician services, outpatient procedures, and preventative care, is funded through a specific formula. Beneficiaries are responsible for covering 25% of projected program costs through monthly premiums. When hospital consolidation increases pricing power, new specialized treatments become more expensive, and an aging population requires longer-term care, the spending per enrollee rises accordingly—and so do the premiums.

Since these medical cost increases far outpace the annual inflation metrics used to calculate Social Security COLAs, seniors face a predictable squeeze: their benefits grow modestly, but the healthcare expenses deducted from those benefits grow substantially.

Looking Ahead: A Decade of Declining Purchasing Power

The trajectory suggests this problem will intensify rather than resolve. Medicare trustees project that the standard Part B premium will reach $347.50 by 2034—nearly double today’s level. This represents an average annual increase of approximately 7%, a rate that will almost certainly exceed typical inflation and the resulting Social Security COLA adjustments.

Under current projections, seniors can expect this same unfavorable math to persist throughout the 2030s. Medical innovation, an increasingly elderly population, and hospital market consolidation will all contribute to further premium escalation.

Limited Protections: The Hold Harmless Provision

One safeguard exists for vulnerable populations: the hold harmless provision prevents Medicare premium increases from reducing a beneficiary’s total monthly payment from one year to the next. However, this protection only applies to beneficiaries receiving fewer than $639 monthly in total benefits—a threshold covering only the lowest-income seniors—and only for those already receiving Social Security when they become eligible for Medicare.

For the majority of retirees, no such protection applies. Their purchasing power gradually erodes as premiums climb and COLAs lag behind.

Preparing for a New Reality

The uncomfortable truth is that Social Security, while foundational to most retirees’ income (with 62% of retirees citing it as a major income source), faces mounting pressure from rising healthcare costs that directly reduce benefit value. The cruel math governing the relationship between COLA growth and Medicare premiums shows no signs of reversing.

Seniors and near-retirees should not assume that nominal benefit increases will preserve their standard of living. Instead, planning around predictable healthcare cost inflation and structuring retirement finances to account for declining real purchasing power from Social Security appears increasingly necessary for financial stability in the decades ahead.