According to new consumer price data released today, inflation in June continues to slow. Still, the Social Security cost of living adjustment may be slightly higher than estimated one month ago. The Senior Citizens League (TSCL) now estimates the Social Security cost of living adjustment (COLA) 2024 could be 3 percent.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the index that’s used to determine the COLA, was up only 2.3 percent year over year. However, the average inflation rate over the past twelve months rose slightly and thus affected our COLA estimate, rising from 2.7% last month to 3% based on the June data.
There are still three more months of data before the COLA is announced in October, and this estimate could change. The COLA is determined based on inflation 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 difference between the two is the amount of the COLA, which would be payable for the check received in January 2024. The 2023 COLA computation can be found on the Social Security website.
A COLA of 3 percent would raise an average monthly benefit of $1,787.00 by a little more than $53.60. 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, 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’s an estimate, and it doesn’t include any significant new costs that come up 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 almost $15 per month from 2023. Other costs could drive Part B premiums even higher.
As of today’s COLA forecast, the affordability outlook for a $15 per month Part B increase looks challenging for some but doable for most Medicare beneficiaries. If inflation continues to slow and the COLA for 2024 is lower, the risk that the Part B premium increase may exceed the amount of the COLA increases, especially for those with the lowest Social Security benefits.
Here is a hypothetical example of how it works: If the 2024 COLA were 1.3 percent (the same as the amount received in 2021). The Part B premium climbs by more than $15.60 per month, and people receiving a Social Security benefit of $1,200 or less would be at the highest risk of seeing no growth at all in their Social Security benefits in 2024.