By Mary Johnson, editor
Social Security beneficiaries can look forward to receiving one the highest cost-of-living adjustments (COLA) ever paid in the history of the program next year. Based on consumer price index data through August, the 2023 COLA could be 8.7%. That would raise an average retiree benefit of $1,670 by $145.30 per month.
There’s just one more month of consumer price data to come in before the 2023 COLA is expected to be announced on October 13, 2022, and the actual COLA could be different than this estimate. Social Security recipients will see the increase in the check to be received in January 2023.
In addition, the COLA will not be offset by rising Part B premiums. In fact, for the first time in more than a decade, Part B premiums will decrease next year by $5.20 per month from $170.10 in 2022 to $164.90. Savor this moment. It’s unlikely that we will ever see it again in our retirements.
To put things in perspective, Medicare beneficiaries were overcharged for their Part B coverage in 2022 and this drop in Part B premiums means that Medicare collected significantly more than was needed to cover Part B costs in 2022. When the Centers for Medicare and Medicaid Services (CMS) announced the 2022 monthly Medicare Part B premium rate of $170.10, that was a stunning 14.5% increase from the 2021 premium. It was double the amount that Medicare’s own Trustees had forecast for 2022 which was published in their annual report just a few months earlier.
That increase was driven in large part by the potential costs of Aduhelm, a pricey and controversial new drug for the treatment of Alzheimer’s disease. At the time, Aduhelm had a $56,000 per year price tag, and there was uncertainty over Medicare coverage of the drug and how frequently it might be prescribed. CMS at the time stated that such a large increase was necessary to allow for potential Medicare Part B costs during 2022.
But just weeks after the announcement of the 2022 premium increase, the manufacturer of Aduhelm cut its average price in half, to $28,200 per year. Then, in early 2022, CMS announced that its pending coverage decision for Aduhelm might only be for very limited use —in clinical trials and only for certain types of Alzheimers patients. The Secretary of the Department of Health and Human Services instructed CMS to reassess the 2022 Medicare Part B premium. After re-assessment, CMS agreed that the 2022 Part B premium was higher than necessary, and that the excess would be used to reduce the 2023 premium.
Most retirees that we hear from, tend to experience a loss in Social Security buying power over time, due to the cumulative effect of their COLA falling short of actual inflation that they experience. These shortfall effects can mean lower savings, higher levels of debt, and the need to supplement income by other means such as through continuing to work longer.
How has inflation impacted your standard of living in recent years? Please tell us by taking TSCL’s new Retirement Survey.
Will The 2023 COLA Be The Highest Ever? Almost.
While the 2023 Social Security cost-of-living adjustment (COLA) will be the highest since 1981, there were three other times that inflation and the COLA were higher than the 2023 COLA:
Source: COLA History, Social Security Administration
“Reexamination Of The 2022 Medicare Part B Premiums,” by CMS Principal Deputy Administrator and Chief Operating Officer, Jonathan Blum, May 19, 2022.