An estimated 10 million Medicare beneficiaries who are covered by a Medigap policy and Part D plan, spent $5,000 in 2019 — $416 per month — just for Medicare premiums according to findings from TSCL’s 2019 Senior Survey. That’s a significant percentage of a retiree’s household budget when the average Social Security benefit in 2019 was just $1,460 per month.
Retirees should not try to rely on the annual cost-of-living adjustment (COLA) to cover Medicare Part B and Medigap premium increases even though the COLA is intended to provide protection from rising costs. Medicare premiums are among the fastest growing costs in retirement, yet the COLA is adjusted using an index that does not include any Medicare premium data. Consequently, the annual COLA increase significantly lags behind the growth in Medicare premiums.
According to TSCL’s research on typical retiree costs, Medicare Part B premiums grew 198 percent from 2000 through 2019, and the average Medigap premium grew by 135 percent over the same period. But since 2000, COLAs have raised Social Security benefits just 50 percent. This disparity means that today’s retirees are forced to rely more heavily on other sources of income in retirement, such as savings and pensions if they have those resources. Millions do not. The U.S. Government Accountability Office recently estimated that 48 percent of U.S. households age 55 and over have no retirement savings.
The Senior Citizens League supports legislation that would strengthen Social Security COLAs by using the more generous Consumer Price Index for the Elderly, CPI-E to calculate the annual adjustment. Had that index been used since 2015, benefits would be about 2 percentage points higher today and an average benefit of $1,215 in 2015 would be about $26 per month higher today.
Can we fix Social Security’s financing while providing a more adequate COLA? Tell us what you think by taking TSCL’s 2020 Senior Survey.