Why We Need A Better COLA

Why We Need A Better COLA

Social Security recipients will get 2% cost-of-living (COLA) adjustment effective January 2018.  But despite it being the largest increase in five years, the news is being met with frustration from millions of retiree households who won’t see any of the raise, primarily due to rising Medicare Part B costs.

For people with incomes less than $85,000, the monthly Medicare Part B premium in 2017 is $134, and Medicare Trustees expect it to stay at that amount in 2018.  But the vast majority of retirees are paying a Part B premium that’s far lower than $134 — about $110 or less — due to a special provision of law that protects Social Security benefits from reduction when Medicare Part B premiums rise more than the COLA raises benefits.

Those people include Barbara B. — a retired home healthcare aide who lives in the Indianapolis area.  “We’re due for the increase,” she says.  But rising Part B premiums will likely take her entire COLA, leaving her with no increase at all in her net operating Social Security benefit again in 2018.

In 2015, the monthly Medicare Part B premium for people with incomes less than $85,000 was $104.90.  When the Social Security Administration announced that there would be no COLA in 2016, Barbara — like 70 percent of all other Social Security recipients — was protected from reductions in her Social Security benefits by a provision of law known as “hold harmless.”  Barbara’s Medicare Part B premium stayed the same, at $104.90, even though Medicare Part B premiums that year rose to $121.80 for people like new enrollees who were not protected by hold harmless.

In 2017 the COLA was just 0.3%, but the Medicare Part B premium rose to $134.00 for people like new enrollees and others who haven’t started Social Security yet and pay for their Medicare by check.  Once again, the Part B premium of Barbara and the vast majority of Social Security recipients was protected from reductions.  Barbara’s monthly Medicare premium was adjusted to 108.00, taking every penny of her tiny COLA boost.

Medicare Part B premiums are expected to stay at $134 per month in 2018, leaving people like Barbara facing a big premium increase.  The $134 premium is $26 per month more than she paid this year, and more than what Barbara expects to get from her COLA in 2018.  That means her Part B premium will be adjusted again to prevent reduction in her benefits.  As much as that protection is appreciated, Barbara is frustrated about high Medicare premium costs after years of low or no COLA growth. “It’s been 36 months since I’ve had any raise in my net operating Social Security, but my actual household costs continue to go up,” Barbara says.  “This isn’t fair to retirees,” she adds.

Barbara, who is now 75, retired 9 years ago.  In 2009, the first year after starting benefits, she received a 5.8% COLA and the Part B premium stayed the same as the year before (at $96.40).  But in the following 8 years, COLAs dropped to record lows, averaging just 1.1% per year over the entire period.

Other Medicare costs climbed as well, the Part B deductible, and out-of-pocket costs charged by doctors and for other services.  Barbara’s prescription drug plan bumped her medication to a higher formulary tier and her blood pressure medication that used to have zero copay now costs $8.00 per month.  And after recent years of so much extreme weather, homeowner’s insurance is now one of her fastest - growing costs.

Barbara has a number of ways she tries to cope.  She qualifies for an age reduction waiver on real estate taxes, and energy assistance to help cover the cost of heating her home.  To save on her phone bill, she asked her phone company for a discount and got it.  She uses shopping points from Kroger where she buys groceries to save money on gasoline.

But she worries how she will manage another year with no net increase in her benefits.  “This isn’t right,” she says. “Congress isn’t looking out for the interests of seniors,” she adds. “I’m going farther and farther into poverty.”

TSCL recently delivered letters to every Member of Congress calling on them to support legislation that would provide a more fair and adequate COLA.  “Congress created the automatic COLA in 1972 to help benefits keep up with inflation.  But according to our research, COLAs are failing to keep up with the rising costs seniors are facing.  Since 2000 Social Security benefits have lost 30 percent of their buying power, and in the last year alone they have lost 7 percent.”

TSCL supports a number of bills that would tie the COLA to the Consumer Price Index for Elderly Consumers (CPI-E).  To learn more, visit online at www.SeniorsLeague.org.