Social Security Cost of Living Increase Too Small?
The cost of living increase for Social Security benefit payments this year will be only 0.3 percent. Does such a tiny increase make sense to you? Average American Seniors probably would disagree with such a tiny increase since it does seem like the things that we actually use are going up in price right? If government economists are the ones that calculate the increase, and government pays the increase, you might think that there’s a little conflict of interest! The benefit increase is based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Most Seniors aren’t “urban wage earners” or “clerical workers” – we’re Seniors, most often retired and therefore most of us buy similar goods and services and so why isn’t our increase based on what we consume?
We know inflation is very low right now; but how do we calculate inflation? It’s based on a “basket of goods” and assumes that “one basket fits all” and that’s probably not a very safe assumption. For example, some things that we buy are plummeting in price. Computer chips and electronics are getting cheaper and cheaper; but seniors aren’t the hottest market for computers, so maybe that’s not important to us? Gas has been pretty cheap these days; but again, seniors tend to drive less than the average. Probably the number one concern for most Seniors would be the cost of medicine, both products and services. Guess what items are rising fastest in cost? Yep, healthcare products and services! If a “basket” of the kinds of goods and services that seniors consume most was used as the benchmark for the Social Security cost of living increase, we might see something closer to a 5% increase (just based on food, housing and healthcare products and services).
Although we’ll get a tiny increase in Social Security benefits, unfortunately, the Medicare Part B premiums will rise. As you probably know Medicare Part B covers outpatient treatments, labs and doctor visits. Because of various trade-offs, most Social Security recipients will experience an off-setting increase in payments and increase in costs of Medicare, so overall they will see no change.
The Medicare Trustees estimate premiums for those not protected by the hold-harmless provision could rise 22 percent from $121.80 per month this year to $149 per month next year. The highest income group could see premiums rise from around $380 per month this year to $467 per month next year.
In 2015, Congress stepped in and provided a $7.5 billion loan to the Medicare program which prevented a big spike in Medicare premiums for many higher-income seniors. There could be calls from seniors and advocacy groups to get Congress to step in once again to limit the premium increases. But the overall trend is clear, that medical care costs are increasing and that seniors will bear an ever larger burden.
Medicare costs and benefits can be pretty complex. Luckily, many Senior Centers around the country have resources to help you with some decisions you might have to make.