Social Security Update

No Increase for 2016 but….

It could be belt-tightening time for 65 million seniors, because for just the third time in four decades, Social Security recipients won’t get a cost-of-living adjustment in 2016, the Social Security Administration announced Thursday.

What’s even worse, more than 17 million Medicare beneficiaries will see their Part B premiums rise 52%, more than 10 times the recent rate of health care inflation. It’s all part of a perfect storm caused by low inflation and the Social Security Act.

The “hold harmless” provision of the Social Security Act forbids the cost of higher Medicare Part B premiums from being passed on to most beneficiaries when they don’t get a raise in their Social Security benefits, according to the Center for Retirement Research. So 70% of Medicare beneficiaries will pay the same Medicare Part B premium in 2016 as they did in 2015: $104.90. The other unlucky 30% of Medicare beneficiaries are left to pick up the tab.

At the moment, most of that 30% will see their premium rise to $159.30 per month. But 3.1 million with incomes above $85,000 could see premiums rise to anywhere from $223.00 per month up to $509.80.

The people hit with higher premiums include new enrollees during the year (2.8 million); enrollees who do not receive a Social Security benefit check (1.6 million); high-income enrollees  (3.1 million); and dual Medicare-Medicaid beneficiaries, whose full premiums are paid by state Medicaid programs (about 10 million).

The culprit: The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) did not rise enough in the  12 months ended September 2015 — used to determine the COLA, according to a report by the Center for Retirement Research at Boston College.

The U.S. Bureau of Labor Statistics announced Thursday that inflation, as measured by the CPI-W, fell 0.6% over the 12 months ending September.  For Social Security beneficiaries to receive a COLA, the CPI-W must rise. Social Security recipients did not receive COLA adjustments in 2010 and 2011 because of low inflation.

The only way that could change for seniors in 2016 is if Congress changes the hold harmless law or if the Centers for Medicare and Medicaid Services decides against the increase.

The Part B premium for 2016 will be announced this fall.  If the past two years are any indication, Medicare recipients should get the final word on premiums before the end of the month.

Article from USAToday