Health care costs and prescription drug prices almost always go up. Rents have gone up. Food prices have also gone up, even though the price of oil has gone down. But the federal government is saying those on Social Security do not need a cost-of-living increase in 2016.
Core inflation (CPI) with all food and energy items removed from the index, has increased 1.8% for the last year. But because gasoline is cheaper, the government is saying inflation was near zero — and so therefore, no COLA.
But what about the elderly or disabled that don't drive a car and benefit from lower gas prices? Tough luck grandma!
There will also be no COLAs for federal retirees, those on Supplemental Security Income (SSI) and our veterans. But USA Today reports that federal employees — both civilian and military who are still working — could see a 1.3% raise next year (Why, if there was no inflation?)
Meanwhile, the Service Employees International Union (which represents almost 2 million state government workers) reports their renewed contract will give them a 1.48% cost-of-living raise on December 1, 2015 — and the year after, a 2.75 percent cost-of-living raise on December 1, 2016 (as they should, as everybody else should, to halt the long decline in incomes since 1979).
How those on Social Security will get screwed...
The Social Security Act specifies a formula for determining the cost-of-living adjustment based on a broad measure of consumer prices for urban wage earners and clerical workers — called the Consumer Price Index (CPI-W). But older Americans say this measure of inflation does not fully reflect price increases for the goods and services they use. Older Americans typically devote more of their budgets to medical care, so their COLAs should be based on an alternative rate of inflation known as CPI-E (and definitely NOT Chained-CPI).
Social Security has provided automatic cost-of-living adjustments in every year since 1975, with exceptions in 2010 and 2011. But inflation was extremely low in the past 12 months, leading to another benefit freeze. Gasoline prices, in particular, have declined sharply, holding down overall prices in the economy.
To protect older Americans, federal law stipulates that, in most cases, the increase in a person’s Medicare premium cannot exceed the increase in the person’s Social Security benefit. The purpose of this “hold harmless” provision is to prevent a reduction in Social Security benefits.
But by shielding 70 percent of beneficiaries from premium increases, that same law exposes the other 30 percent to price hikes. Medicare actuaries predicted in July that the standard premium for those beneficiaries would rise next year to $159 a month, from a little less than $105 a month for most beneficiaries, the same as in 2013 and 2014.
The actuaries also predicted an increase in the annual deductible for Part B of Medicare, to $223 next year, from $147 in 2015. Beneficiaries generally must pay the deductible before Medicare begins to pay.
If premiums are frozen for 70 percent of lower income beneficiaries, higher overall Medicare costs must be spread across a smaller group of people. That smaller group, of more than 15 million, includes some higher-income Medicare beneficiaries — who are already required to pay higher premiums, but should be able to afford the price increase.
Who exactly will get screwed...
Forbes reports 7 million people who are not covered under the “hold harmless” law will have to pay the entire Medicare Part B increase in 2016. You will pay higher premiums in 2016 if you fall into one of these groups:
- those who enroll in Medicare for the first time in 2016;
- those who don’t receive a Social Security benefit at age 65;
- those who pay their Medicare premiums directly, rather than having them deducted from their monthly Social Security payment;
- those who are already paying a higher premium because of their higher income.*
* The increase in premium may affect singles whose modified adjusted gross income is more than $85,000/year or those who are married with modified adjusted gross income more than $170,000 per year. The premium increase also applies to those who are dual Medicare/ Medicaid recipients, and whose premiums are paid by state Medicaid programs. However, in this case the state will have to pay the increased premiums, not the recipient. AARP provides a good analysis of who will have to pay the higher premiums.
Grandma always gets screwed...
The L.A. Times wrote that during the last Democratic debate, Hillary Clinton was right to state that many widowed and single women didn't make a lot of money during their careers and need more help from the Social Security system. But the CNN moderator let her off the hook for explaining to us as to how she would do this. But the L.A. Times also noted that Senator Bernie Sanders and former Maryland Governor Martin O'Malley have both come out explicitly for raising the tax cap and increasing benefits for all retirees.
But on top of this news, Politico published a "questionnaire" from the conservative House Freedom Caucus which seeks a commitment from the next new House speaker to tie any increase in the debt ceiling to cuts to Social Security, Medicare and Medicaid. CNN reported that Senate Majority Leader Mitch McConnell also wants significant changes to Social Security and Medicare in exchange for raising the debt ceiling and funding the government.
With Republicans we'd ALL get screwed...
With the ongoing debates about the solvency of the Social Security, disability and Medicare trust funds (see all my posts on the subject here, here, here, here, here, here, here, here, here, here, here, here and here), considering the enormous part of the economy they represent, one would think that a lot more time would have been spent discussing this topic during the recent presidential debates.
In contrast to everything the Democrats had to say about Social Security at their last debate (which wasn't much), here's everything the Republicans had to say about Social Security during their last debate (which wasn't much either):
DANA BASH: Mr. Trump, you have said once or twice that you are really rich, and you are by far the richest person on this stage. Chris Christie says billionaires like you and even people who make and earn far less should no longer get Social Security, or at least there should be limits based on - on their income. You think he's wrong, and if so, why?
DONALD TRUMP: Speaking for myself, I'm OK with it. I think there's a certain truth to it. I know people that, frankly, it has no impact on their life whatsoever. There are many people. I would almost say leave it up to them, but I would be willing to check it off, and say I will not get Social Security. I do not...
DANA BASH: What about the country as a - as a policy?
DONALD TRUMP: As a policy, I would almost leave it up to the people. Don't forget they pay in and they pay in, and maybe they do well, and maybe some people want it. But the fact is that there are people that truly don't need it, and there are many people that do need it very, very badly. And I would be willing to write mine off 100 percent, Dana.
DANA BASH: So is a voluntary program the way to get the Social Security system solvent again like that.
CHRIS CHRISTIE: No, it's not. But with Donald, it's a good start. That's really good. (LAUGHTER) No, listen. This is an issue that we've gotta talk about, and we haven't talked about yet. 71 percent of all federal spending is on entitlements and debt service. When John Kennedy was elected president in 1960, it was 26 percent. Harvard and Dartmouth says that Social Security's going to go insolvent in seven to eight years. So what I say is very simple. We need to save this program for the good people out there who have paid into the system and need it. And if that means making sure that folks like Donald and many of us on the stage don't get it, that's the right thing to do because here's what Hillary Clinton is going to want to do. She's going to want to put more money into a system that has already lied to us and stolen from us. This government doesn't need more money to make Social Security solvent. We need to be not paying out benefits to people who don't really need it. We need to protect the people who Social Security means the difference between picking between heat and rent and food. That's why I put out the proposal and that's the people I'm trying to...
TAPPER CUTS HIM OFF: Thank you, Governor.