Social Security to correct overpayments: This is what happens to Medicare if your check is clawed back

Since taking office on 20 January this year, Donald Trump’s new administration has been buzz sawing its way through government agencies and departments with the help of the new Department of Government Efficiency, or DOGE. Thousands of federal employees have been fired, offices closed and whole departments eliminated.

Social Security has not been spared despite Trump saying: “Social Security will not be touched.” DOGE has posted on its ‘Wall of Receipts’ 47 offices that will be closed and so far at least 7,000 employees have been given pink slips, but there are reports that perhaps as much as half of its once 60,000-strong workforce could be shed. Now a new concern for Social Security beneficiaries has arisen, a change in how the Social Security Administration claws back overpayments that could mean severe economic hardship for affected beneficiaries.

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Social Security overpayments could mean no payment soon

The Social Security Administration announced in a blog post earlier this month that it was reinstating the default overpayment withholding rate from 10% to 100% of a person’s monthly benefit starting 27 March.

This will only affect Social Security overpayments after that date and not those that occurred prior to 27 March which will remain at 10% under the withholding rate for “improper” payments established in 2024. The withholding rate will also remain at 10% for overpayments made to Supplemental Security Income beneficiaries.

What happens to Medicare if your Social Security check is clawed back?

One of the major concerns with this change to withholding rates is how it will affect Medicare payments. Most seniors have their Medicare Part premiums automatically deducted from their monthly Social Security benefit. The Social Security Administration has not clarified whether it will allow beneficiaries to have their Medicare premium deducted from benefits before withholding for any overpayment.

On the contrary, and without allowing seniors to set up another payment method, it could result in those affected losing their healthcare through Medicare.

What should you do if you’ve received an overpayment from Social Security?

If a beneficiary has received an overpayment from Social Security, the SSA will send them a notice but withholding will not begin until at least 30 days have passed from the date of notification. They will be able to appeal or ask for a waiver, and while it is being considered the SSA will not claw back any overpayment from your monthly benefits.

If you disagree with the overpayment amount, you can file an appeal using SSA form 561. On the other hand, if you believe there has been an error due to no fault of your own (the burden of proof to determine whose at fault for the error now rests with the SSA), or the repayments would result in you not being able to meet your living expenses, you have the right to ask for a waiver through SSA form 632.

How do Social Security overpayments occur?

Overpayments are exceeding rare accounting for less than 1% of payments made by the Social Security Administration. A 2022 report from the Social Security Office of the Inspector General estimated that the agency made around 73,000 overpayments the previous year. While there is always room for improvement, this represents only a small fraction of the over 864 million payments made annually by the agency.

Typically, overpayments are a result of beneficiaries failing to update their earnings data or inform the SSA about other changes that could affect the amount of benefit they are eligible to receive. “Improper” payments, as they are called by the SSA, can also be the result of miscalculation by staff at the Social Security Administration itself.

They most commonly occur for those receiving disability payments (SSDI) or Supplemental Security Income (SSI). But they can also occur for widowed people who begin collecting their Social Security payments when eligible but are still receiving survivor benefits at the same time. Additionally, seniors who continue to work after they begin claiming Social Security benefits that bump up against the earnings limit.

Those who haven’t reached full retirement age, age 67 for Americans born after 1960, workers lose $1 of their Social Security payments for every $2 they earn above the current $23,400 limit. The limit greatly increases for those who are over the full retirement age, currently set for 2025 at $62,160. For every $3 dollars you earn over that limit the SSA deducts $1 in benefits.

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