Approximately 65 million people collect Social Security benefits on a monthly basis, including retired and disabled workers. Typically the government adjusts Social Security benefits annually to reflect cost-of-living increases. The government recently announced that there will be no cost-of-living adjustment (COLA) for 2016. This is only the third time in the past 40 years that the Social Security Administration has not increased its payments.
The result of the no increase in COLA will be higher medical costs for retirees and disabled Social Security recipients. This will have a significant effect on those with Medicare Part B as COLA typically covers premium increases. In instances when COLA does not cover premium increases, the “hold harmless” law exempts roughly around 70 percent of seniors from coming up with the difference in premium costs in cases where the premiums are directly taken out of Social Security payments. The effect of no COLA in 2016 will mean that the remaining 30 percent will be burdened with the increase in premiums that would have otherwise been distributed across the board. It is estimated that premiums could be raised by 52 percent, causing a burden on already limited-income households.
White House Press Secretary Josh Earnest stated that this effect on premiums was unintended and that a resolution is being discussed with members of Congress. The government has not yet released details on 2016’s premiums, so those on Medicare are in a difficult position. Medicare has opened enrollment for seniors to change their coverage, but with uncertainty regarding premiums, it will be challenging for them to make educated decisions.
The crux of this issue is that two individuals, both receiving Medicare, can be paying drastically different premiums for the same care depending on whether they collect Social Security benefits or not. This brings up concern about intrinsic fairness. “There is no reason why two people with the same income should pay different Medicare premiums based on whether the money is coming from a Social Security check or a checking account”, said Richard Thissen, President of the National Active and Retired Federal Employees Association.
It is important to plan ahead for retirement as many unexpected expenses may arise, particularly regarding healthcare costs. If you are in the process of planning for retirement, it is best to consult with an attorney who can guide you in making the necessary arrangements and help you protect your assets. The attorneys at Hobson-Williams, P.C. are available for consultation by calling 866-825-1529.