As a result of inflation, people on fixed incomes find that their incomes decline in value over time. One extremely important feature of Social Security is that its benefits are adjusted every year automatically to offset increases in inflation, so that the modest, but vital, benefits do not erode over time. It is important to understand that these adjustments are not increases. They are intended to simply allow people to tread water, to maintain their purchasing power.
Unfortunately, the government’s cost of living adjustment for Social Security is based on inflation experienced by workers and not by retirees and people with disabilities who are unable to work. Older people and people with disabilities have, on average, higher health care costs; those costs tend to rise considerably faster than overall inflation. For that and other reasons, Social Security beneficiaries generally experience higher costs of living than workers, so Social Security adjustments are often inappropriately low. Consequently, Social Security beneficiaries are not even treading water, but rather losing ground. Nevertheless, even inadequate adjustments are better than none.
The actual adjustment is not calculated until October, because it is based on the inflation rate of the third quarter of this year, which ends September 30, over the third quarter of last year. Nevertheless, Social Security’s actuaries project at the end of each year their best estimate of what it will be. For 2019, they have projected a cost of living adjustment of 2.4 percent, an average of about $32 more each month. In recent months, though, the rate of inflation has increased, mainly as the result of increased oil prices. Consequently, it looks like the adjustment might be higher than 2.5 percent – perhaps even as high as 3 percent.
That is good news for Social Security beneficiaries, many of whom have little or no other income. The bad news is that millions of people likely will not experience that full increase; some may not see any increase at all and others might see a decline in their overall income, as the result of rising health care costs.
Most people with Medicare who receive monthly Social Security benefits have their Medicare Part B premiums deducted directly from those Social Security payments. For these people, Congress has provided that the annual increase in the Medicare Part B premium must be no larger than the Social Security cost of living adjustment.
So, they can’t go below zero, and lose some of their Social Security benefits, but they can certainly see their cost of living adjustment go completely to health care costs. For those who do not have their Medicare premiums deducted automatically from their Social Security benefits, they can, indeed, lose even more ground.
According to the most recent Medicare Trustees Report, average costs for Medicare Part B, the part covering doctors’ bills, is estimated to increase by $327 in 2019. The average cost for Medicare Part D, insurance for prescription drug costs, is estimated to increase by $63. That is a total increase of $390. For those receiving a Social Security benefit of $15,000 – and tens of millions receive less than that — the adjustment will only add $375, if the 2019 Social Security adjustment is 2.5 percent.
This is unacceptable. After a lifetime of work, Americans should have enough guaranteed Social Security to maintain their standards of living. The solution is three-fold. First, Congress should enact a better, more accurate measure of inflation for people receiving Social Security benefits. In addition, benefits, which are modest, but vital, should be increased. Finally, Congress should improve Medicare by expanding it to cover such vital services as hearing aids, dental work, and vision care. Premiums, co-pays, and deductibles should be eliminated. And everyone should be covered. Improved Medicare for All will improve the nation’s health outcomes while costing a fraction of what we pay today.
It is long past time to enact a more accurate cost of living adjustment for Social Security, expand its benefits, improve Medicare, and extend it to everyone. That is profoundly wise policy. It also represents the views of the vast majority of us.
If you want Congress to expand Social Security, please sign this petition.
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