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October 18, 2016 at 10:23 AM
The Social Security Administration’s news that next year’s cost of living adjustment is the lowest ever, 0.3%, is angering older Americans. And that anger is likely to spike next month, when Medicare costs are poised to jump significantly for some seniors.
The 2017 COLA will raise Social Security benefits “by only a few dollars, and any increase will be completely offset by stiff increases in the Medicare Part B premium for most people 65 and over,” said Mary Johnson, a Social Security policy analyst and researcher for The Senior Citizens League, in a statement.
Seniors got no COLA this year. The average retiree will see their monthly Social Security payment rise by $5, to $1,360, in 2017. For a couple, the hike will be $6, to $2,260.
“I just lose and lose and lose and lose,” retiree Millicent Graves, 72, of Williamsburg, Virginia, told the Associated Press.
“I just have to rely more each month on cashing in investments,” explained Graves, a retired veterinary technician, who says Medicare and supplemental insurance costs account for about 33% of her roughly $930 monthly Social Security benefit.
Over the past seven years, COLAs have “flat-lined at unprecedented lows,” according to the Senior Citizens League, and have averaged 1.2% per year—which is less than half the 3% that COLAs averaged from 2000 to 2009. This low growth in benefits “has a significant impact on overall retirement income of anyone who has been retired since that year,” Johnson explains.
“For people retired over the past seven years, monthly benefits in 2016 are today 13% lower than if inflation had been the more typical 3% per year,” she pointed out. “In dollar amounts, that’s $150 per month lower for someone with average benefits.”
Other groups, such as the Insured Retirement Institute (IRI) echoed Johnson’s remarks.
“Unfortunately, for the average retiree this increase will only amount to a few dollars, and it is more than likely that beneficiaries will give it back in the form of higher Medicare Part B premiums, which typically are deducted from Social Security benefits,” said IRI CEO Cathy Weatherford, in a statement.
(Related: 7 Tips to Maximize Social Security Benefits From an Ex-SSA Director)
Why So Low?
Some observers are blaming low gas prices for the limited COLA for 2017, but it’s the overall Consumer Price Index for Urban Wage Earners and Clerical Workers (or CPI-W) that is used in the calculation of benefit increases.
The Senior Citizens League and other groups point out that this index surveys the spending patterns of younger working adults, rather than the goods and services more typical of Americans 62 and older.
For instance, the CPI-W puts more weight on electronics and gasoline prices, which both have fallen over the past two years. Plus, this index gives less weight to healthcare costs and housing, which have seen price hikes over the past two years, and represent the two largest spending categories for older consumers, according to The Senior Citizens League.
If fact, the group’s 2015 survey found that 72% of those polled had a nearly $80 jump in their monthly household costs.
According to the U.S. Bureau of Labor Statistics, while the CPI-W increased 1.2% over the last 12 months, the Consumer Price Index for All Urban Consumers (CPI-U) grew 1.5% during the same period. (These figures do not reflect seasonal adjustments.)
The bureau says increases in the shelter and gasoline indexes were “the main causes of the rise in the all-items CPI-U. The gasoline index rose 5.8% in September, accounting for more than half of the all-items increase. The shelter index grew 0.4%, which was its largest increase since May.
But BLS data puts healthcare costs way ahead of other goods and services when it comes to 12-month hikes, including shelter.
The prices of medical goods rose 5.2% in the last year, while the costs of healthcare services jumped 4.8%. In contrast, shelter prices moved up 3.4%.
