With No COLA Increase, Congress Should Pass Medicare Fix

U.S. Congress building
AARP sent the following letter to Congress on Oct. 14.

AARP has deep concern that for only the third time in over 40 years, there will be no Social Security cost-of-living adjustment for 2016. To make matters worse, as a result, 30 percent of Medicare beneficiaries will see their monthly Medicare Part B premium dramatically increase, and all Medicare beneficiaries will experience an increase in their Part B deductible.

Congress should protect the 16.5 million Medicare beneficiaries — which includes new enrollees, people not collecting Social Security, and beneficiaries dually eligible for Medicaid — from the harmful effects of dramatically increasing premiums, due to there being no Social Security cost-of-living adjustment (COLA) as well as protect all Medicare beneficiaries from the large increase in their deductible.

>> Newsletter: Get the latest on AARP advocay programs affecting you

The Social Security Trustees announced Oct. 15 that there will be no Social Security COLA in 2016, due to unusually low energy prices. However, the impact of very low energy prices on Social Security recipients may be overstated in the current cost of living formula, and as a result, the need for a COLA may be understated in this week’s announcement.

The Social Security COLA is calculated on the basis of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which does not accurately represent the buying habits of seniors. The CPI-W reflects the purchasing patterns of workers, many of whom are younger and healthier than most Social Security recipients. Social Security recipients spend more of their monthly budget on health care, food and housing than do younger workers, and all three of those categories have experienced meaningful price increases over the past year. As a consequence, the CPI-W underestimates how Social Security beneficiaries experience inflation, and how much their benefits should in fact increase to maintain purchasing power.

The Social Security COLA would be even more inaccurate and benefits would be even less adequate if recent proposals to adopt a chained consumer price index (Chained CPI) had been enacted. AARP has opposed all attempts to enact a Chained CPI, and will continue to do so, because the Chained CPI would further underreport inflation experienced by Social Security beneficiaries, and further erode their standard of living, cutting an estimated $127 billion in Social Security benefits from current and near retirees in the next ten years alone.

The COLA announcement not only fails to reflect the actual health care and other expenditures of Social Security beneficiaries, but will actually contribute to a large increase in out-of-pocket health care costs for millions of Medicare enrollees.

By law, Social Security beneficiaries whose Medicare premium is automatically deducted from their Social Security benefits are held harmless from Medicare premium increases if there is no COLA. While this greatly assists the 70 percent of Medicare beneficiaries who are protected in this way from a reduction in their monthly Social Security benefit, it results in a disproportionate increase in premiums for the 30 percent of Medicare beneficiaries who are obligated by law to pay for the increases that are not passed onto Social Security beneficiaries. Those held-harmless beneficiaries’ monthly premium will stay at $104.90, whereas the unprotected Medicare beneficiaries will face a 52 percent increase to $159.30 each month. In addition, all Medicare beneficiaries will see their Part B deductible increase 52 percent as well, from $147 to $223.

Get Help: Find out if you’re eligible for public benefits with Benefits QuickLINK »

If the COLA was based on a measure which more accurately reflected the living expenses of seniors, there would have been a COLA for 2016. Thus, premiums would be $120.70 and the deductible would be about $169. These are still significant increases, but much more manageable increases for seniors.

AARP urges Congress to reduce and mitigate the impact of the sudden, sharp increases in the Part B premium and deductible as soon as possible.  Ideally, all Medicare beneficiaries should be held-harmless in the face of no Social Security COLA adjustment.

Photo: Schroptschop/iStock

Also of Interest

See the  AARP home page for deals, savings tips, trivia and more.

Search AARP Blogs

Related Posts
December 11, 2018 10:07 AM
In an election year filled with partisanship and political fights, it’s no surprise that many Americans feel that their voices aren’t being heard or that the issues that affect their lives aren’t being addressed. But, many outstanding elected officials work hard every day to make a positive difference for their constituents.  That’s why AARP recognizes state legislators, governors, and other elected officials – from both sides of the aisle – who have stepped up and worked together to write, support, and advance common-sense policies that help older Americans remain in their homes and communities and retire with confidence. AARP is proud to announce our fifth annual bipartisan class of Capitol Caregivers, who fought this year to increase support for family caregivers and their loved ones, along with our fourth annual bipartisan class of Super Savers, who championed policies that enhance retirement security.
December 05, 2018 01:06 PM
Caroline is a mother of two children and a preschool teacher who unexpectedly became a family caregiver for her father after he suffered a major stroke. Her father, Tom, now deceased, lost the use of his right side and his ability to speak. Multiple surgeries and rehabilitation treatments later, he was able to live at home with the help of nurses. But it was up to Caroline to provide daily care, such as overseeing appointments and handling certain nursing responsibilities, like managing his medications. “I became the person my father could rely on more than anyone in the world,” Caroline said. “I became his safe place and his best friend.” In communities across the country, family caregivers like Caroline are caring for older parents, spouses and other loved ones, helping them to remain at home – where they want to be. Their tasks are done out of love and commitment, but are not easy. That’s why AARP is fighting for family caregivers and their loved ones in every state. In 2018, AARP advanced new policies to provide more help at home, flexibility at work, training, relief and more, which will benefit over 30 million family caregivers. Here are a couple highlights:
November 27, 2018 08:55 AM
A few months ago, I wrote a blog about the vital role that transportation options play in what we at AARP call “livable communities” – great places to live for people of all ages. Being able to get around is critical to earn a living, raise a family, contribute and stay connected to your community and enjoy life. And, having alternatives to getting behind the wheel of your own car is particularly important for older adults who want to stay in their homes and communities as they age.