The roughly 50 million retired and disabled Americans that receive monthly Social Security benefits are not projected to receive a Cost of Living Adjustment (COLA) for the next two years according to trustees who oversee Social Security. This would be the first time that Social Security beneficiaries haven’t received a cost of living adjustment since automatic increases were established in 1975.
Federal law mandates that Social Security benefits cannot go down – but here’s the catch: Medicare prescription drug program costs are set to rise. The costs associated with the Medicare prescription drug benefit are typically automatically deducted from monthly Social Security payments. Thus, if Social Security stays the same, and the automatically withdrawn costs for the prescription drug program go up – monthly checks will go down.
Critics argue that Social Security recipients shouldn’t get an increase when inflation is negative. They note that recipients got a big increase in January â€” after energy prices had started to fall. They also note that Social Security recipients received one-time $250 payments in the spring as part of the government’s economic stimulus package.
“Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt,” said Andrew G. Biggs, a resident scholar at the American Enterprise Institute, a Washington think tank. “Congress has to be able to tell people they are not getting everything they want.”
Perhaps this is true, but today’s elders are in a precarious situation in that they spend a disproportionate amount of their income on health care needs, an industry that has expenses far exceeding inflation. Rising health care costs hit elders hard. Many seniors cannot just pick up more work hours to account for increased costs, and most have seen their investments and homes decrease in value. Is it any wonder that adults age 65 and older are the ones with the fastest growing credit card debt?
Itâ€™s not like the older set is blowing their credit card balances on frivolous items like Viagra or Virginia Beach golf vacations. Demos says that seniors are using their cards as a â€œplasticâ€ safety net. Medical expenses are a common factor â€“ the Demos study says that Americans 65-and-older have an average of $2,194 in credit card related medical expenses.
Think the Medicare prescription drug program cost increase won’t hurt? Think again.