By Mary Johnson, editor
The Centers for Medicare and Medicaid Services recently announced that the standard Medicare Part B premium will be $148.50 in 2021, an increase of $3.90 per month from $144.60 in 2020. That increase, which I earlier feared would be considerably more, was restricted by legislation enacted last fall. But even with legislation to keep the Medicare Part B flat, the Part B premium still went up 2.6% over 2020, twice as much as the annual cost-of-living adjustment (COLA.). This trend of Medicare costs increasing several times faster than Social Security benefits creates chronic headaches for retirees, as the Medicare Part B premium consumes a growing share of Social Security benefits.
Consider this, $375 per month is about one quarter of the average $1,523 per month Social Security benefit in 2021. About one third of those participating in our 2020 Senior Survey indicated they spent that much on their total healthcare costs. Another 31% said they spend more than $1,000 a month on total healthcare costs — roughly two-thirds of the average Social Security benefit! These findings are particularly troubling considering that the Government Accountability Office estimated in 2019 that almost half of households with people aged 55 and older have no retirement savings or other form of pension outside of Social Security.
The 2021 Part B increase comes at the same time beneficiaries are receiving one of the lowest COLAs ever paid. The annual inflation adjustment will increase the average Social Security benefit by only $20.00 per month. Because Medicare Part B premiums and out-of-pocket costs grow several times faster than the annual COLA, healthcare costs take a rapidly growing share of Social Security benefits in retirement. The situation can leave older households without adequate income and dwindling savings just a few years after retiring.
The problem is well known, but so far Congress has taken no action to address it. The Medicare Trustees have for years described in their annual report how rising Medicare costs will take an ever-growing portion of Social Security benefits. They estimate that Medicare Part B and Part D premiums, as well as cost sharing for both programs, currently equals just 24 percent of the level of the average Social Security benefit. But that estimate does not include many of the typical Medicare costs that most retirees actually have, and thus understates the scope of the problem. The findings based on your participation in TSCL’s annual Senior Survey is proof of that.
TSCL’s annual Senior Survey asks how much you spend per month on all healthcare costs. Participants are asked to include not only premiums for Medicare Part B, and Part D as well as out of pocket costs for each, but also premiums for Medigap or Medicare Advantage plans, as well as all out-of-pocket spending on doctor visits and services, as well as dental and optical exams, glasses and hearing aids.
The following chart illustrates how survey participants responded a year ago.
This issue gets considerable attention from Members of Congress and the media. These findings are a huge red flag that the standard of living of older Americans is eroding, and this is true not only for lower income households, but for all retirees, because healthcare costs are growing much more rapidly than COLAs. To provide greater retirement security, Social Security benefits need to be boosted, and Medicare cost increases need to be slowed in a way that saves billions without cutting benefits. The Senior Citizens League is supporting the Emergency Social Security COLA for 2021 Act, which would replace the 1.3 percent COLA with a more adequate 3 percent COLA in 2021. How were you affected by healthcare costs in 2020? Please take our TSCL’s 2021 Senior Survey.