My Social Security COLA Is Being Wiped Out By Higher Medicare Prices: Imagine This -You have worked maybe 40 to 50 years of your life and have settled into retirement. Unfortunately, you haven’t been able to save much for your golden years and now depend on that monthly Social Security payment to hit your account. You are one of 70-million Americans who take Social Security.
Inflation has taken a bite out of that check, so the government instituted a cost of living increase to account for higher prices. Every little bit helps, but there is another problem. If you have Medicare Part B, the premiums have gone up too, making your increase in Social Security worth nothing – it’s a complete wash.
What’s Happening With Social Security? Enter COLA
Those who receive Social Security got a 5.9 percent increase in 2022. This is the biggest cost of living-adjustment (COLA) since 1982. The United States has enjoyed mostly low inflation rates over the last 10 to 15 years. In fact, there was no COLA in 2009 and 2010 and just over 1 percent COLA raises from 2012 to 2014.
COLA was based on a law passed in 1972 to help seniors on Social Security with inflation. 1973 was the year inflation hit 6.22 percent with prices on gasoline spiking due to the oil crisis that year. Gas went up 36 percent from 1973 to 1974.
So, fast-forward to 2022, and let’s look at what it means for your Social Security payment. If you are getting $2,000 a month, with a 5.9 percent COLA increase that means you will get an extra $118 a month. That’s a little above the average increase of $91 per month. It doesn’t sound like much – but it’s better than nothing – especially helping with high prices at the grocery store.
However, inflation has actually climbed higher than your COLA – which theoretically matches the annual inflation rate. But what is frustrating is that the consumer price index went up 7 percent in December compared to December of 2021. So, seniors’ purchasing power has actually gone down with the 5.9 percent COLA.
Medicare Part B Premium Increase Wipe Out Your Raise in Social Security
But that’s not all you have to worry about. Medicare has costs too. If you take the standard Medicare Part B, the premium costs $170.22 in 2022 (or higher depending on your income). It went up from $148.50 in 2021 – that’s a 14.6 percent increase – the largest hike in history. This wipes out your Social Security COLA that only went up 5.9 percent.
And Medicare Part B is directly deducted from your Social Security stipend, so you are not really getting a COLA boost in real dollar terms. Medicare Part A, what most retirees use, has a fairly high deductible of $1,556 in 2022. That’s up from $1,484 in 2021 – a 4.9 percent increase – again pretty much in line with your COLA raise. Healthcare costs hit your wallet hard.
Maybe You Are Protected
The good news is that 70 percent of Medicare recipients won’t have to pay the full 14.6 percent Medicare Part B premium increase. This is because a legal provision protects the majority from any premium increase that exceeds COLA. Good thing that the “hold harmless” clause is a reality. But you still have to pay an extra 5.9 percent in Part B premiums. Again, that wipes out your Social Security COLA. And if you are part of the unlucky 30 percent, you pay the full 14.6 percent increase.
Why Are Medicare Premiums Going Up?
Centers for Medicare & Medicaid Services said rising health care costs and increased drug prices are hitting Medicare hard. For example, just one drug for Alzheimer’s, Aduhelm, will cost $56,000 per year for each patient. That might make total costs nearly $29 billion just for one drug.
On the other hand, you probably know that Social Security itself is insolvent. The trust funds that support the program could run out of money within 13 years. So, if you retire in 2034, your benefits may only be worth 78 percent of what they would be now.
Fortunately, there is some movement by Congress to address these shortcomings. But not before the Democrats and Republicans continue to blame each other for the higher prices in Medicare that wipe out Social Security COLA. Republicans accuse the Biden Administration of causing inflation. Democrats say it’s because Republicans will not support the Build Back Better Act that passed the House of Representatives but has stalled in the Senate.
Both parties claim to be the policymakers that will save senior citizens, but if you are on Social Security and Medicare, you will still feel the financial pinch despite the legislative gamesmanship and political wrangling in Washington, DC.
Now serving as 1945’s Defense and National Security Editor, Brent M. Eastwood, PhD, is the author of Humans, Machines, and Data: Future Trends in Warfare. He is an Emerging Threats expert and former U.S. Army Infantry officer. You can follow him on Twitter @BMEastwood.