Column: Social Security
beneficiaries must swallow flat COLA in 2017
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[October 20, 2016]
By Mark Miller
CHICAGO
(Reuters) - (The writer is a Reuters columnist. The opinions expressed
are his own.)
Zilch. Nada. Diddly squat.
Take your pick of words that best describe the Social Security inflation
adjustment announced this week, but it all adds up to this: another year
of flat benefits. The U.S. Social Security Administration declared a 0.3
percent cost-of-living adjustment (COLA) for 2017 - a bit more than the
zero increase in 2016. But the entire increase likely will go to
straight into
higher Medicare Part B premiums, which are deducted from benefit
payments for most retirees.
The Social Security COLA has lacked fizz for much of the past decade. It
has been less than 2 percent since 2009, with the exception of 2011 when
it was 3.6 percent. For three years there was no inflation adjustment at
all.
By law, the COLA is determined by an automatic formula tied to the
Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W). Produced by the U.S. Bureau of Labor Statistics (BLS), the
index gauges a market basket of goods and services purchased by working
people, and it has been muted lately by low energy prices, said Max
Gulker, senior research fellow at the American Institute for Economic
Research.
“If you look category by category at prices that are up or down, energy
is what is pulling things down overall,” he said. “The categories that
are really rising are healthcare and education costs.”
Advocates for seniors would prefer a COLA driven by an index more
sensitive to the inflation that impacts seniors, such as the CPI-E (for
elderly), an experimental index maintained by the BLS. The CPI-E has
risen only slightly more quickly than the CPI-W over the past decade,
but there is a clear need to deal with the impact of healthcare in
calculating COLAs. The elderly population spends more than twice as much
on medical care than the general population, according to the Center for
Retirement Research at Boston College.
BROADER DEBATE NEEDED
Consider how this year’s meager COLA will play out for the typical
retiree. The average Social Security beneficiary will receive a monthly
raise of just $5, to $1,360, according to the SSA. But the five-spot
could all go to healthcare.
Final Medicare premium figures will not be released until later this
autumn. But projections by the Medicare trustees point to a sharp 22
percent increase in the monthly Part B premium (which covers outpatient
services), to $149.
Federal law contains a “hold harmless” provision - the idea is to
protect people enrolled in Social Security from a decline in their
benefits. The rule prevents the dollar increase in the Part B premium
from exceeding the dollar increase in a Social Security benefit - and it
protects about 70 percent of Medicare enrollees.
![](http://archives.lincolndailynews.com/2016/Oct/20/images/ads/current/ldn_sda_062409.png)
But the hold-harmless rule effectively places the entire burden of
higher Part B costs borne by enrollees (25 percent of overall program
costs) on 30 percent of the Medicare population - one reason why the
premium is expected to rise so sharply. Who would be affected next year
by this inequitable structure?
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![](../images/ads/current/demay_inv-lda081412.png)
*
Anyone who is delaying their filing for Social Securitybenefit * Federal
retirees who participated solely in the olderCivil Service Retirement System
and, therefore do not receiveSocial Security benefits * State government workers
- most of whom participate indefined-benefit pension plans and are not covered
by SocialSecurity during their tenure as state employees * Low-income
"dual-eligible" seniors who receive SocialSecurity and also participate in both
Medicare and state-runMedicaid programs (Their premiums are absorbed by state
Medicaidbudgets.) * Anyone enrolling in Medicare for the first time next year *
Affluent seniors who pay high-income Medicare premiumsurcharges
Moreover, all Medicare enrollees will face a higher Part B deductible, projected
to rise from $166 to $204 next year. And premiums for Part D prescription drug
plans are also jumping. The average monthly premium will rise by 9 percent, to
$42.17, according to a Kaiser Family Foundation (KFF) analysis released this
week. The average Part D PDP deductible is projected to rise by 7 percent. The
sharp increases underscore the importance of doing a plan checkup during the
annual enrollment season now under way. (http://reut.rs/2eiHBPW)
Taken
together, these numbers are a big deal for seniors, many of whom live on modest,
fixed incomes - in 2014, half of the Medicare population lived on annual incomes
of $24,150 or less, according to KFF.
![](http://archives.lincolndailynews.com/2016/Oct/20/images/ads/current/peasleymemorials_lda100213.png)
So the long-range solution to the COLA mess should be crafted in the context of
a broader debate about Social Security reform. We need that conversation to take
place in the bright sunshine of open debate in Congress, and it should be
focused on expanding benefits while fixing Social Security’s long-range
financial shortfall. Bigger benefit checks and more generous COLAs should be on
the menu for discussion.
Short-term action is needed, too. U.S. Senate progressives led by Massachusetts
Democrat Elizabeth Warren are calling for a one-time “emergency” COLA of 3.9
percent - equal to the average percentage raise that top CEOs received last
year.
Last year, Congress responded to calls for fairness on Part B by implementing a
fix that blunted the increase substantially for those not held harmless, and a
group of 75 national advocacy organizations already is urging Congress to take
action again this year. Anything is possible after the Nov. 8 elections, so
final premium numbers might not be known until the very end of the year.
But here’s hoping lawmakers do take action. Fair is fair.
(Editing by Matthew Lewis)
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