This week it was announced that Social Security’s cost of living adjustment (COLA) will be only 0.3 in 2017 based on consumer priced inflation. However, Social Security recipients (especially seniors) will end up with less money for a couple of reasons.

First, COLA is based on consumer prices paid by everyone. One of the biggest reasons for the increase not being greater was the price of oil being down from the prior year. The biggest consumers of gas prices and transportation are not the typical Social Security recipient. For example, seniors typically spend more on health care, medications, etc. Therefore, the typical Social Security recipient probably had a greater increase in the cost of living than the COLA. It is this author’s opinion that the COLA formula for Social Security recipients should be revised to reflect their actual costs – not that of the public as a whole.

Second, the projected increases in Medicare Part B premiums will certainly be greater than the COLA benefit increases. For those already receiving Social Security, the law requires that the Medicare Part B premium (commonly either $104.90 or $121.80 per month) cannot be greater than the COLA increase. As a result, Social Security recipients would receive no net gain, and, in fact would end up with less funds since the typical Social Security recipient’s cost of living is not accurately reflected by the COLA as mentioned in the prior paragraph.

To make matters worse, about 30% of Medicare beneficiaries (new enrollees, enrollees who do not receive Social Security benefit checks, dual Medicare-Medicaid beneficiaries and enrollees with high incomes who are subject to the income-related adjustment) are not protected from the Medicare Part B increasing more than the COLA. Last year Congress (which is presently not in session due to the election) gave a $7.5 billion loan to Medicare. Congress will need to act again.

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