“Social Security checks are going up. Medicare premiums are going down. That’s a big deal for seniors.”
But the reasons are not that great for seniors.
Here’s an explanation.
Social Security checks
For months, Biden has signaled that he is taking aggressive action to address inflation, which by one measure has risen to 8.2 percent for the 12 months ending in September. That’s a sharp contrast to the 1 to 2 percent inflation rate that was the norm in the previous decade. Prices rose 9.1 percent in the 12 months ending in June.
The reason Social Security payments are going up is because Social Security benefits, unlike virtually all annuities, are adjusted every year to keep pace with inflation as measured by the Department of Labor’s consumer price index (CPI-W). Thus benefits are always increasing, making it very valuable to retirees.
On Oct. 13, the Social Security Administration announced benefits would increase 8.7 percent, for an average increase of more than $140. That’s sounds like a lot, but in theory it’s only letting seniors keep pace with the increase in the cost of living.
Whether CPI-W is the appropriate mechanism for such annual adjustments is the subject of debate. The CPI relies on surveys of households and measures the increase in costs of a basket of goods purchased by urban consumers. BLS has often fiddled with the formula, sometimes under pressure from lawmakers worried about the federal budget deficit, because of concerns that the measure overstated inflation. In the 1990s, the annual inflation rate as measured by the CPI was reduced almost a full percentage point as a result of technical adjustments made by the BLS. Without those adjustments, Social Security benefits would be even higher today.
Moreover, other inflation gauges, such as one that measures costs for producers or one that measures prices for both urban and rural consumers, might more accurately reflect changes in the cost of living.
The reality is that if Biden’s and the Federal Reserve’s efforts to combat inflation were more successful, then Social Security benefits would not be going up so much.
Medicare Part B is the part of the old-age health program that covers physician and outpatient services. Seniors pay a monthly fee. Biden is right that the premium will go down next year. Premiums were $170.10 per month in 2022 and will be $164.90 next year. That’s a decrease of about 3 percent.
That sounds like good news. But premiums had soared in 2022, rising $21.60, or 14.5 percent, one of the biggest increases in recent history. Premiums had been $148.50 in 2021.
In other words, while premiums are going down slightly in 2023, they are still $16.40 higher than 2021. That’s an increase of 11 percent over two years.
The annual deductible would also be cut from $233 in 2022 to $226 in 2023, a decrease of $7. But, again, the annual deductible the year before had increased $30. So overall, deductibles are also 11 percent higher than two years earlier.
The Centers for Medicare & Medicaid Services said it had hiked premiums so much in 2022 in part because it had to add reserves to cover a new Alzheimer’s drug that is administered by a physician in a clinic or hospital. The drug, known as Aduhelm, was anticipated to cost $56,000 per year. But then Biogen, the manufacturer, cut the price almost in half — to $28,200. That left the program with excess reserves that are now being passed on to people with Medicare Part B coverage.
But, for seniors, the modest reductions in the coming year will not make up for the sharp increases from the year before.
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