Social Security Ruling Drives Up Medicare Costs for Millions

Social Security Ruling Drives Up Medicare Costs for Millions


Roughly 65 million American seniors received a jolt to their pocketbooks on Thursday—they will not receive a cost of living adjustment to their 2016 monthly benefits from Social Security. That marks only the third time since 1975 that retirees will be denied a slight uptick in their benefits to help pay their rent or mortgage, buy groceries and cover some of their out of pocket medical costs.

The government justified the freeze by citing the low inflation rate – especially low gas prices.  The index the Social Security Administration uses to measure a so-called “basket” of selected consumer goods barely moved up between the third quarter of 2014 and the third quarter of this year, eliminating any economic justification for boosting the monthly benefit. “Under existing law, there can be no COLA in 2016," the agency said in statement.

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That is small solace to millions of seniors who find it difficult to make ends meet on $1,341 a month for a retired worker or $2,680 for a widowed mother with two children. "It is unacceptable that millions of senior citizens and disabled veterans will not be receiving a cost-of-living adjustment to keep up with their rising living expenses,” said Democratic candidate for President Sen. Bernie Sanders of Vermont who is promoting a plan to expand Social Security benefits. "At a time when senior poverty is going up and more than two-thirds of the elderly population relies on Social Security for more than half of their income, our job must be to expand, not cut, Social Security."

The decision will force many who live in areas where housing and food prices don’t match the government’s price basket of commodities to pinch their pennies even more. But for tens of millions of mostly higher income Americans, the decision will trigger a 50 percent increase in their Medicare Part B premiums next year unless Congress and the Obama Administration step in at the last minute to block it.

The likely stiff premium increase, which was reported last August by The Fiscal Times, is prompted by a quirk in the law that penalizes wealthier beneficiaries and others any time the Social Security Administration fails to approve an annual cost of living adjustment. Medicare Part B and the Social Security trust fund are interconnected, and most seniors on Medicare have their monthly premiums for doctor and hospital care automatically deducted from their Social Security checks.

Because the federal law “holds harmless” about 70 percent of Medicare recipients from premium increases to cover unexpected rising healthcare costs, the remaining 30 percent of Medicare Part B beneficiaries suffer the consequences by paying higher premiums.

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Unless Congress intervenes, about 15 million seniors, first-time beneficiaries or those with serious chronic illnesses who claim both Medicare and Medicaid coverage will see their premiums jump from $104.90 per month to $159.30 for individuals, according to an analysis by the Center for Retirement Research at Boston College. High-income couples would have to pay multiples of that increase.

The last time retirees were denied a cost of living adjustment was in 2011. Max Richtman, president of the National Committee to Preserve Social Security and Medicare, said that the combination of no COLA and the skyrocketing Medicare Part B premium would make it a particularly tough year for seniors in 2016. 

Advocacy groups like AARP and Richtman’s organization have long criticized the Labor Department Consumer Price Index used to calculate inflation, arguing that alternative experimental measures such as CPI-E provide a more accurate and nuanced picture.

Related: Congress’ Medicare ‘Fix’ Could Leave Seniors Paying More

“If accurate inflation protection for seniors is truly our goal, Congress needs to adopt a fully developed CPI for the elderly,” Richtman said  in a statement. “Until then, we urge Congress to act quickly to mitigate the devastating Medicare hikes headed for millions of Americans who can’t afford them.”