Times are tough, and they could soon get tougher for almost 3.2 million Social Security recipients. The problem they’re facing: a combination of no Social Security cost-of-living adjustment (COLA) for 2010 and a hike in Medicare premiums that could leave them with less money.

But there’s movement in Congress to provide relief, at least for this year.

Here’s the problem, as outlined in an excellent brief on the issue by the Kaiser Family Foundation’s Tricia Neuman and Juliette Cubanski.

Every year for the past 34 years, Social Security recipients have had their payments adjusted upward to reflect increases in the cost of living. Last year it was a 5.8 percent increase, reflecting how much prices had risen from the third quarter of 2007 to the same period in 2008.

But that price spike was largely caused by skyrocketing oil prices, and when they dropped dramatically between 2008 and 2009, so did the inflation rate. In fact, the Consumer Price Index used to calculate Social Security increases fell 1.9 percent between August 2008 and last August.

The good news is that payments are not adjusted downward to reflect falling prices. The bad news is that Social Security will almost certainly announce this month that there will be no cost-of-living increase next year. Unless inflation picks up again, there probably won’t be one in 2011 either.

COLA linked to Part B

But wait. There’s another problem. Medicare Part B premiums are adjusted each year to keep up with increases in expenditures. (Part B covers outpatient health care expenses, including doctor fees.)

Usually the increased premium cost is more than offset by the cost-of-living increase, so folks still end up with more money in their pockets.

And just to make sure that people don’t end up worse off, there is a “hold-harmless” provision in the law. That provision prevents Social Security payments from effectively decreasing from one year to the next as a result of increases in Part B premiums.

Problem solved? Not really, because this hold-harmless protection does not apply to three groups of beneficiaries: those who are new to Social Security (whose premiums can’t possibly be higher than last year’s because they had no premiums); higher-income Medicare beneficiaries; and those who qualify for both Medicare and Medicaid—so-called dual eligibles. The last group is off the hook, though, because Medicaid pays the premiums.

That leaves the two remaining groups, which together make up about 8 percent of the 41 million Part B beneficiaries, to pay for the entire increase in the program’s expenditures. Their premiums will increase from $96.40 a month this year to $104.20 a month next year and $120.20 in 2011, unless Congress takes action, which appears to be happening.

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