With Medicare outlays spiraling due to outlays for COVID-19, Congress recently passed legislation to head off an expected Part B premium spike, by restricting the increase for 2021. TSCL has been warning about the potential of a low cost of living adjustment (COLA) and spiking Medicare premiums since July of this year.
The bill caps the Part B premium increase for next year at the 2020 amount plus 25% of the difference between the 2020 amount and a preliminary amount for 2021. The preliminary amount would be calculated the same way that it would have been without the bill, but would prevent dramatic increases that may have occurred as a result of Medicare Part B premiums growing when the COLA is so low.
In April, the Medicare Trustees estimated that the standard monthly Medicare Part B premium, which covers doctors and outpatient services, would rise $8.70 — from $144.60 in 2020, to $153.30 in 2021. The April forecast, however, was made prior to the coronavirus, and did not factor in the impact of COVID-19 on expected medical costs or inflation.
The Congressional Budget Office (CBO) recently released its fall economic and budget update which estimates that due to the COVID-19 pandemic, Medicare outlays will grow 12% over 2020, double the rate what was forecast in April. If that estimate proves to be the case, that suggests the Part B premium increase could be twice as high as the earlier forecast — about $17.40 per month.
With it being such a contentious election year, Congress enacted legislation to limit that jump in Part B which could be made even worse because the COLAs of so many beneficiaries would not be high enough to cover the full amount of the increase.
The last time no COLA was payable, was in 2016. The Medicare Trustees had estimated Part B premiums would increase by an unprecedented 52%. Congress enacted legislation that limited the premium increase to 16%, but also required a $3 per month “repayment” to make up the difference in subsequent years. After deduction for Part B premiums, roughly half of all beneficiaries saw no growth in their net Social Security benefits from 2016 until 2019, when there was a 2.8% COLA, according to TSCL’s annual surveys.
Over the past decade, there has been no COLA at all three times — in 2010, 2011, and 2016. In 2017 the COLA was just 0.03%. The 2021 COLA of 1.3% is one of the lowest COLAs ever paid. TSCL feels this is a clear sign that the inflation adjustment for Social Security benefits is failing the very people it was designed to protect.
The Senior Citizens League strongly endorses legislation that would guarantee that COLAs are no lower than 3% and is working with Congress for the passage of an emergency COLA benefit boost for 2021.