Tens of millions of Social Security recipients will not be receiving the annual cost-of-living-adjustment (COLA) in 2016, and in a double whammy, many Medicare recipients will also see an increase in their medical costs.
There are about 65 million retired and disabled workers, spouses and children drawing Social Security benefits in the U.S. every month, or about one in four households. Another 15 million are disabled veterans, federal retirees, and their survivors, as well as those on Supplemental Security Income, a disability program for the poor.
The annual COLA by law is based on government measures of the consumer price index (CPI), and it has been flat because of lower gas prices. As of Wednesday, the American Automobile Association (AAA) reported that the average price of a gallon of gas was $2.30 a gallon, down 90 cents from a year ago.
While this is good news for most of the driving public, it really doesn’t affect most seniors because they don’t commute to work. Regardless of the price of gas going down, the lack of a COLA is not being taken very well by seniors, especially those on a fixed-income.
Added to the worries of increasing prices at the supermarket and yearly increases in rent, seniors have to contend with rising prices for prescription drugs along with projected increases in Medicare deductibles and premiums, even though advocacy groups are lobbying Congress to prevent the increases.
Susan Bradshaw, who lives in a retirement community in Atlanta told the Associated Press, “The price of food has gone up. The price of where you live has gone up unless you live in a government-assisted place. Where are you going to get the money to live on?”
The only good news out of the COLA announcement benefits high-income workers. Social Security is financed through a 12.4 percent tax on wages up to $118,500 a year. Half the tax is paid by workers, and the other half is paid by the employer. The wages subject to the Social Security tax usually go up when the COLA increases, but because it remains flat, it will remain at $118,500.
The average monthly Social Security payment amounts to $1,224. Most Social Security recipients have their Medicare Part B premiums for outpatient care deducted directly from their Social Security payments, and this can run $104.90 a month. If the increase in Part B premiums goes through, premiums will jump to $159.00 a month.
