Politics or Poppycock

Seniors League Org.

March 12, 2009

Social Security beneficiaries face a grim dilemma next January, if predictions from the latest economic report of the Congressional Budget Office (CBO) prove correct, — no cost-of-living adjustment (COLA) in 2010.  But if that were to happen, and Medicare Part B premiums continue to increase, it would set off an unprecedented test of a little-known provision of law that protects the Social Security benefits of tens of millions of seniors.

Under current law, when the Medicare Part B premium increases more than the amount of a person’s Social Security COLA, the government is required to adjust the Medicare premium so that the person’s Social Security check is not reduced from one year to the next.  With only a few exceptions, this provision protects most people who have Medicare.

According to the Congressional Budget Office’s (CBO) 2009 annual Budget and Economic Outlook, the Consumer Price Index (CPI) is expected to drop because of easing gasoline and other prices, a characteristic of recessions.  By the third quarter, when the government determines the annual COLA payable January 1, 2010, the CPI may be close to, or at, zero, the CBO said.  And according to the 12 month CPI data through December 2008, the index used to determine COLAs isn’t just zero, it’s minus 0.5%.

If this were to happen, it would be the first time since Congress made the Social Security COLA automatic in 1975 that beneficiaries would fail to get an increase.  Since the automatic COLA was established, the lowest ever paid was 1.3% in 1986 and 1998.

Should inflation come down to zero, or even near zero, and Medicare Part B premiums increase even modestly, the federal government could be on the hook for potentially billions in unanticipated Medicare Part B premium costs that normally are automatically deducted from beneficiaries’ Social Security checks.  “The situation would just add to the exploding deficit,” says Shannon Benton, TSCL’s Executive Director.

The prospect of no COLA is particularly galling, because seniors are experiencing stiff increases in out-of-pocket Medicare drug costs in 2009.  According to a national survey, the average beneficiary will see a 24% increase in his or her monthly premiums.  And many drug and other Medicare plans also steeply increased co-pays and other out-of-pocket costs. “Clearly, the method that the government uses to determine senior COLAs is not adequately accounting for the costs that seniors actually have,” Benton notes.  TSCL believes the COLA does not fairly reflect the portion of income seniors spend on health care and other costs, and is lobbying Congress to pass legislation ensuring that COLAs will be more representative and adequate in the future.

TSCL also is calling on Congress to take steps immediately to constrain the rise in Part B spending.  There’s well documented evidence of a considerable amount of waste in the Medicare system that Congress needs to get under control.  “These are anxious times for seniors, and every one is dealing with bad financial news daily,” says Benton.  “We call on Congress to take action in weeding out wasteful Medicare spending, and to weigh the consequences of a Medicare Part B premium increase, in a year when COLAs may increase very little or not at all.”

Sources:  Social Security Act, Title XVIII, Sec. 1839 (f)  2009 Budget and Economic Outlook, Congressional Budget Office, January 2009.  Consumer Price Index December 2008, Bureau of Labor Statistics, January 16, 2009.  2009 Social Security Trustees Report, March 25, 2008.  “Average Medicare Prescription Drug Premiums to Rise 24%”, Avalere Health, September 26, 2008.