Column: For U.S.
retirees, 2017 COLA lacks fizz
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[June 23, 2016]
By Mark Miller
CHICAGO (Reuters) - Retirees will
receive a paltry increase in their Social Security checks in 2017 -
the second consecutive year of flat or near-flat benefits, and the
fifth year of inflation adjustments below 2 percent.
Next year’s cost-of-living adjustment (COLA) will be just two-tenths
of 1 percent, according to predictions in the annual report of the
trustees for Social Security and Medicare, released on Wednesday.
That number could be revised upward this autumn, when the official
COLA is released, said Paul Van de Water, senior fellow at the
Center on Budget and Policy Priorities - perhaps as high as one-half
of 1 percent.
“The trustees’ assumptions are based on inflation numbers that are a
few months old,” he said. "The latest numbers suggest the COLA could
be a bit higher.” Still, for a retiree receiving the average monthly
Social Security benefit - $1,341 - the raise is not likely to top a
paltry $5 per month.
Don’t spend it all in one place, folks.
TWEAKING THE FORMULA
The COLA news underscores the need to revisit Social Security’s
formula for keeping seniors even with costs - and it will provide
fresh fuel for proponents of a broader expansion of benefits as part
of any eventual program reform.
Progressives have been calling for a more generous annual COLA
formula. The current formula is tied to the Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W), which gauges a
market basket of goods and services of working people –who tend to
be younger and spend less on healthcare than seniors.
A more generous COLA would be tied to the CPI-E, an experimental
measure created by the U.S. Bureau of Labor Statistics focused on
inflation affecting seniors.
Healthcare cost increases have been moderate over the past few
years, but they are starting to rise. The trustees project that
per-beneficiary costs in Medicare’s Part B (outpatient services)
will rise 3.1 percent next year.
Even so, if the Social Security COLA is very low, the monthly
premium for Part B could stay flat at $104.90 per month for the
third consecutive year. That is because of a “hold harmless”
provision in federal law that prevents premiums from rising if the
increase would result in a net reduction in Social Security
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The hold-harmless clause would protect roughly 70 percent of
Medicare enrollees from a premium increase. But it also would push
rising program costs onto the remaining 30 percent, who could see
premiums jump to $149. That group includes new Medicare enrollees,
anyone on Medicare who is delaying filing for Social Security
benefits, and some federal and state employees. Premiums for
high-income seniors - who already pay surcharges - also would rise.
However, uncertainty about the final COLA means it is too early for
these seniors to hit the panic button. “The number might not be that
large,” said Van de Water.
The trustees also project a 5.6 percent jump in cost of the Part D
prescription drug program. That will push average Part D premiums to
$40, from $34 this year, notes Juliette Cubanski, associate director
of the program on Medicare policy at the Kaiser Family Foundation,
who adds that average deductibles will rise to $400 from $360 this
"Much of the increase is due to introduction of high-cost specialty
medications," she said.
LOOMING DEBATE IN CONGRESS
Social Security’s overall health did not change much in the past
year. The combined trust funds for Social Security’s retirement and
disability benefits still are projected to be depleted in 2034, at
which point current income would be enough to pay about
three-quarters of benefits. But the financial report card should set
the stage for a reform debate in the next Congress.
That debate is expected to focus on restoring long-range stability
to Social Security’s trust fund - and modernization and possible
expansion of benefits. Expansion has been a centerpiece of Senator
Bernie Sanders’ presidential campaign; Hillary Clinton and President
Barack Obama have also moved into the expansion camp (http://reut.rs/28Q9Ke5).
The ideas floating around for expansion range from targeted
increases aimed at helping low-income seniors and those who live to
very advanced ages, to a more generous COLA and across-the-board
(Editing by Matthew Lewis)
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