Will the November inflation numbers impact the COLA for social security?
The BLS has reported that in November prices increased 0.8%. Will social security beneficiaries see an additional increase in their cola to reflect this?
Over the last year, prices across the market have increased 6.8 percent according to the Bureau of Labor Statistics. In November, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent, following a jump of 0.9 percent in October. Last month "indexes for gasoline, shelter, food, used cars and trucks, and new vehicles" drove the upward trend in prices.
One population that has been disproportionally impacted by the rapid increases in prices are seniors receiving social security. When living on a fixed income, rapid changes and prices can bring financial insecurity. Before the record-breaking CPI increase of 0.9 percent in October, the Senior Citizens League (SCL) reported hearing from seniors that they were cutting prescriptions in half and cutting down on the number of meals they were eating because the payments were not lasting them through the month.
Social Security COLA increase
Each year to adjust benefits to inflation, the Social Security Administration applies a Cost-of-living adjustment (COLA). In mid-October, the SSA announced that starting in early 2022, beneficiaries would see a 5.9 percent increase reflected in their payments. This rate was calculated by examining the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from July, August, and September.
Both measure prices changes in the market. However, the CPI-W only looks at household spending for two groups within the CPI-U:
How are the CPI-U and the CPI-W different?
While year-over-year the CPI-U has tracked a 6.8 percent bump, those for the CPI-W have recorded a 7.6 percent boost. At 0.5 percent, the increase in November, however, was smaller than that of the CPI-U. Since October 2020 prices for the CPI-W have increased 6.8 percent, almost one percent short of the increase many beneficiaries will see reflected in their checks in 2022. Should inflation continue at its above-average rates, the gap between real increases in the market and the benefits increase offered will continue to grow.
Will the Social Security Administration revise the 2022 COLA?
At this point, no announcement has been made. Typically, the COLA is a close representation of the increase seniors need to maintain at least most of their purchasing power. However, as the economic recovery from the pandemic continues, this device is proving faulty.
What will the Medicare Part B premium be in 2022?
Additionally, many organizations have warned that the increase in the Medicare Part B premium could eat up most of the COLA increase. The monthly premium for Part B is subtracted from a beneficiary's check and in 2022 the price increased $21.60 a month from $148.50 to $170.10. Those with higher incomes will see an even greater increase.
What are the Medicare Part B premiums for each income group?
|File individual tax return||File joint tax return||File married & separate tax return||Monthly Total|
$88,000 or less
$91,000 or less
|$176,000 or less||$182,000 or less||$88,000 or less||$91,000 or less||$148.50||$170|
|$88,000 to $111,000||$91,000 to $114,000||$176,000 to $222,000||$182,000 to $228,000||N/A||N/A||$207.90||$238.10|
|$111,000 to $138,000||$114,000 to $142,000||$222,000 to $276,000||$228,000 to $284,000||N/A||N/A||$297.00||$340.20|
|$138,000 to $165,000||$142,000 to $170,000||$276,000 to $330,000||$284,000 to $340,000||N/A||N/A||$386.10||$442.30|
|$165,000 to $500,000||$170,000 to $500,000||$330,000 to $750,000||$340,000 to $750,000||$88,000 and less than $412,000||$91,000 and less than $409,000||$475,20||$544.30|
|$500,000 and up||$500,000 and up||$750,000 and up||$750,000 and up||$412,000 and above||$409,000 and above||$504.90||$578.30|
Half of the premium increase is related to the possibility that Medicare will begin covering an Alzheimer's drug, Aduhelm. The SCL reported that the manufacturer of the drug, Biogen, has set the price at $56,000 per patient per year, and the government "wants to have the extra money on hand if it decides to cover the cost of the new drug."
This move has been highly criticized and some leaders including Senator Bernie Sanders have called on the Biden administration to eliminate the premium hike. One of the main justifications is that the results and efficacy of the medication are being questioned, and if in the end, the government does not cover the drug, seniors will be paying a much higher price for care than they need to.