When Your Cost-of-Living Adjustment is Completely Taken by Your Part B Premium

When Your Cost-of-Living Adjustment is Completely Taken by Your Part B Premium

By Mary Johnson, editor

Danette D., a retiree living in Missouri, is looking forward to finally seeing a boost in her Social Security benefits in the New Year, due to a 2.8% cost-of-living adjustment (COLA) for 2019.  Danette tells me she hasn’t seen any COLA increase in her net benefit, after the deduction for the Part B premium, for the past 3 years, leaving her no extra income to deal with other costs that have been going up in the meantime, such as Medigap and Part D plan premiums.

For Danette and her husband, who live in subsidized senior housing, COLA increases can be a double-edged sword.  In determining eligibility for the housing subsidy, gross Social Security benefits are used.  An increase in gross Social Security benefits due to the COLA, can disqualify some retirees, when it pushes their income over the income limit.  That may occur even when there is no increase in the net Social Security benefit, after the deduction for Medicare Part B premiums.  Danette feels a more fair way to measure inflation for retirees would be to base the COLA on an index that better reflects rising costs of retirees, such as the Consumer Price Index for the Elderly (CPI-E).

In 2006, I made a forecast that seemed pretty far-fetched at the time, even for me. In an analysis that I prepared for The Senior Citizens League, I estimated that, by 2012, the Medicare Part B premium would be at a level high enough that double-digit annual increases would completely obliterate the annual COLA increase of retirees with average benefits.  The analysis showed that, when this occurred, affected retirees would be protected from reductions to their Social Security benefits when Medicare premiums rose, due to a special provision of law known as the Social Security “hold harmless” provision.  On the other hand, those affected would not see any increase in their net Social Security benefit, potentially for years at a time.  That creates the biggest problems for retirees who have limited retirement savings and assets.

The Social Security hold harmless provision is valuable protection when the Part B premium increases more than the COLA raises Social Security benefits.  Since 2010, the Social Security hold harmless provision has been triggered four times on an unprecedented nation-wide scale, in years when inflation was zero or almost zero.  Social Security benefits of people with average to low benefits, and who retired since 2009, however, have seen very little growth,, while Medicare Part B premiums have grown almost four times faster.

TSCL supports legislation introduced by Representative Donald Norcross (NJ-1) that would adopt the CPI-E to index the annual COLA and would ensure that Part B premiums never take more than 30% of a COLA.  He wrote a Congressional Corner on the bill for us here: https://seniorsleague.org/congressional-corner-february-march-2018/.