Social Security Adjustment Isn’t Calculating the Cost-of-living

By Sue Scheible
The Patriot Ledger

Seniors’ Medicare premiums are rising so rapidly that in five years, the premiums alone will wipe out the annual cost-of-living adjustments in their Social Security checks, according to a new study.

The yearly cost-of-living adjustment is supposed to keep pace with inflation’s effect on the costs of energy, food and transportation. But the monthly premiums for Medicare Part B alone have gone up much faster than the cost-of-living adjustments, and the situation is expected to worsen. In addition to Medicare Part B doctors coverage, many seniors face higher-than-expected premiums for the new Part D drug coverage.

‘‘We are seeing people get hit more and more by increases of every kind,’’ said Edward J. Flynn Jr., executive director of South Shore Elder Services in Braintree.

‘‘It really makes it difficult for seniors, because a lot think they’re all set and they find out they aren’t,’’ said Susan Barnes, director of Weymouth Elder Services.

Dot Caniff, 74, said, ‘‘Every year you get a notice that you will get this much in a COLA increase, then it says they will take this much out for taxes, this much more for Medicare B, and it ends up being $1 more a month. And I say, ‘Thank you.’ At least they’re not taking it away.’’’

The study was done by TREA Senior Citizens League. It based its projected increases in the cost-of-living adjustment and Medicare premiums on Congressional Budget Office estimates and Medicare Part B increases since 2002. It did not factor in the new Part D premiums.

The cost-of-living adjustment has increased less than 14 percent over the past five years, but Medicare Part B premiums have increased by almost 60 percent during the same period, the study report says.

In October, the Social Security Administration announced a 3.3 percent cost-of-living increase in monthly Social Security and Supplemental Security Income benefits for 2007. The adjustment will more than offset Medicare B increases.

By 2012, 20 percent of seniors now on Social Security will find that their monthly checks fail to keep pace with inflation, the study predicts. It projects sharply rising Medicare premiums and cost-of-living adjustments that either decline or show only modest increases.

If the study’s predictions are correct, starting in 2012, increases in the cost-of-living adjustment will be wiped out by Medicare increases for an estimated 9.9 million seniors.

Medicare Part B pays for doctor visits, medical tests and outpatient hospital care. Medicare Part D pays for the new prescription drug program.

The soaring costs will have an especially harsh effect on lower-income seniors and women, who, on average, receive smaller Social Security checks than men do.

The trend will leave more low-income seniors on their own to pay not only for medical bills but also for other inflationary expenses such as energy, food and transportation.

‘‘This is a very dangerous and worrisome development,’’ said Shannon Benton, executive director of TREA Senior Citizens League. ‘‘We have serious concerns about the ability of many of our oldest, most vulnerable citizens to pay for the basic necessities of life.’’

Most seniors have Part B premiums deducted from their Social Security checks. If the Medicare premium increase to Part B exceeds the cost-of-living adjustment, seniors are automatically protected by law from having their checks reduced. However, even though seniors will have their checks remain at the same dollar value year after year, their purchasing power will be significantly diminished by rising costs.

-Many of the 48 million Americans 65 and over who receive a Social Security check depend on it for at least 50 percent of their total income.

-One in three seniors - roughly 16 million Americans - rely on it for 90 percent or more of their income.

-As many as 12 percent of seniors in the United States are living below the poverty line.

The advocates called for a new way of determining the annual inflation adjustment. The government now calculates the cost-of-living adjustment based on a consumer price index that tracks the spending habits of young, urban workers. It is a relatively slow-rising index.

But younger workers have different spending habits than seniors, who typically spend a greater percentage of their incomes on health care and prescription drugs, the costs of which rise much faster than overall inflation.

The advocates want the government to use a Consumer Price Index for Elderly Consumers to more accurately reflect the buying habits of seniors.

Using such an elderly index, a senior who retired in 1984 with average benefits would receive $70 more per month, or $843 more this year.

More than 100 members of Congress have signed on to legislation that would use the specific elder consumer product index to calculate the annual cost-of-living adjustments.