According to the most recent consumer price data, your Social Security cost-of-living adjustment (COLA) will likely be around 3.2% next year. That’s lower than the 5.9% received in 2022, and the 8.7% COLA received this year — but it’s higher than the 20-year average since 2004, which is 2.6%. This is just an estimate, and one more month of consumer price data will come in before the COLA is announced on October 12th.
The COLA is intended to protect the buying power of your Social Security benefits when prices rise, and it’s determined by changes in the consumer price index in the third quarter — July, August, and September — as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Inflation for those three months is added together and averaged, then compared with the third quarter average from one year ago. The percentage of difference between the two is the amount of the COLA, which the Social Security Administration uses to determine the increase in Social Security checks to be sent in 2024. You can find an example of how the COLA is calculated at: https://www.ssa.gov/oact/cola/latestCOLA.html on the Social Security website.
A COLA of 3.2% would raise an average monthly benefit of $1,789.00 by a little more than $53.70. But Social Security recipients won’t learn the bottom line until the Medicare Part B premiums are announced. Part B premiums are automatically deducted from most beneficiaries’ Social Security benefit. In many years, the Part B premium increase can take most, or even all, of the COLA leaving little else to cover other rising prices.
In its annual report released in March of this year, the Medicare Trustees forecast monthly Part B premiums to increase from $164.90 in 2023 to $174.80 in 2024. But that estimate doesn’t include any significant new costs after the estimate is released. One of the most significant new costs could be Medicare’s coverage for another new Alzheimer’s drug —lecanemab, known by the brand name Leqembi, which is expected to cost $26,000 per year without insurance.
Based on spending estimates, we forecast that the drug and related Part B services required to administer and monitor the patient for dangerous side effects would add about $5 per month to the Part B premium for everyone, potentially raising the 2024 premium to about $179.80 per month. Altogether most beneficiaries may see their Part B premium rise by about $15 per month from 2023. Other costs could drive Part B premiums even higher.
Part B premiums are not the only Medicare premiums to contend with. Medicare beneficiaries often enroll in Medicare Advantage plans or purchase a Medicare supplement known as Medigap, which can also charge premiums and raise co-pays and deductibles in response to rising Medicare costs.
Tip: Your chance to compare your health and drug coverage options for 2024 is coming soon. Medicare’s Annual Open Enrollment Period starts October 15, 2023, and runs through December 7, 2023. Adults aged 65 and up should watch for notifications in the mail from their health and drug plans and learn about what costs will be changing in 2024. Counseling is available through state health insurance assistance programs (SHIP) — https://www.shiphelp.org — to help you compare coverage, evaluate and understand your options, and switch to other plans when you find a better deal.
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