The percentage increase in the Medicare Part B premium for 2020, like most other years, is much larger than the percentage increase in the Social Security COLA, proving once again retirees’ need to maximum savings.
For 2020 the Medicare Part B premium will rise 6.7%, or $9.10, to $144.60 — slightly more than expected – while the Social Security COLA will increase 1.6%. For the average retiree, the Part B premium will eat up almost 10% of their $1,484 monthly benefit.
Those Social Security beneficiaries collecting $570 per month or less are likely to see the Part B premium eat up their entire COLA unless they are covered by a low-income program that pays the Part B premium, according to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
“The disparity between the COLA and premiums means that today’s retirees rely more heavily on other sources of income in retirement, such as savings and pensions,” says Johnson.
Over the 20 years from 2000 through 2019, Medicare Part B premiums grew 198% while Social Security COLAs rose just 50%, according to Johnson. “Social Security benefits have lost 33% of buying power since 2000,” says Johnson.
Behind this disparity is the cost of living index used to calculate the Social Security COLA – the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is based on price changes of consumption of households headed by younger working people rather than households headed by people 62 or older and no longer working, explains Johnson. Her league as well as other senior organizations such as the National Committee to Preserve Social Security and Medicare have been pushing for the government to adopt CPI-E — the “E” is for “elderly” — which more closely resembles the spending pattern of retirees.
(Related: Social Security COLA Is 1.6% for 2020)