The fact that Social Security’s payouts get yearly cost-of-living adjustments is one of its largest benefits. In order to help retiree spending power keep up with inflation when it is high—as seniors have experienced over the previous couple of years—these COLAs force monthly checks to increase the following January. Benefits were increased by 5.9% as a result of the COLA for 2022 this year, and according to early projections, the COLA that will go into effect in early 2023 will likely be between 8% and 9%.
What’s even better is that, as opposed to 2022, many Social Security claimants are more likely to actually see the entire amount of their cost-of-living increase enter their bank accounts in 2023. This is due to the likelihood that Medicare, another important program for senior citizens, will partially undo the terrible blow it gave members at this time last year.
How Medicare reduced the Social Security COLA by a significant amount in 2022
About 70 million Americans had a boost in benefits as a result of the 5.9% COLA that went into effect at the start of 2022. The upward adjustment increased monthly payments for the typical Social Security retiree by nearly $90 to $1,614 per month.
However, even individuals who qualified for such benefits didn’t notice a significant increase in their real paychecks. This is due to the fact that the Social Security Administration automatically deducts Medicare premiums from beneficiaries who have signed up for the program.
The cost of Medicare for seniors increased significantly in 2022. In 2022, the cost of Medicare Part B increased by 12.7%, from $148.50 to $170.10 from the previous year. That reduced the average benefit gain by $90, or $21.60 per month.
The Aduhelm Alzheimer’s medicine from Biogen, according to the Centers for Medicare and Medicaid Services, is the main cause of the surge. When the program first began, it was thought that it may eventually pay the whole $56,000 cost of the medicine for Medicare enrollees. The Part B premium for 2022 has been released and includes that estimate.
Can those who receive Social Security get a break?
However, it wasn’t until 2022 that Biogen realized its error and dropped the price of Aduhelm almost in half, at $28,200. Additionally, the Medicare program restricted coverage to participants in approved clinical trials, significantly lowering total costs.
The Secretary of Health and Human Services responded in May after receiving criticism for what at the time appeared to be a significant overcharging of monthly premiums, informing Medicare participants that it would not be possible to lower premiums in the middle of the year due to logistical and legal challenges. But according to the government, in order to reflect the decreased costs associated with Aduhelm, the Part B premium for 2023 will ultimately be reduced.
Actuarial projections at the time indicated that the impact on Medicare rates may be between $5 and $10 per month. Depending on what the monthly impact of the COLA turns out to be in 2023, it may contribute an additional $5 to $10.
Spending that money right away is not advised.
Unfortunately, the inflationary forces affecting the larger economy have not spared healthcare expenditures. In reality, the cost of health care services increased 0.8% month over month in August despite declining inflationary pressures in important sectors like energy.
The 12-month increase now stands at 5.6%. Even if that is below the general rate of inflation, it may still be used to restrict any reduction in Medicare Part B rates brought on by the Aduhelm scenario.
However, many Social Security beneficiaries would be content to keep the whole COLA sum in their monthly income. If it turns out that a decrease in Medicare-related deductions increases their take-home pay, it would just be the cherry on top and wouldn’t do anything to aid financially strapped seniors.
Comments are closed.