Social Security Matters: Ask Rusty – Why the big deal about COLA increases?

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Dear Rusty:
Seems like everyone makes a big deal out of the annual Social Security increase.  The way I see it, why bother?  For the 2017 benefit year my wife’s Social Security increased by .03% but her Medicare increased by 3% for a net gain of 0 dollars.
My Social Security increased by the same .03% but my Medicare increased by 5% for a net gain of 0 dollars.  For the 2018 benefit year my wife’s Social Security increased by 2% but her Medicare increased by 17% for a net gain of 0 dollars.  My Social Security increased by the same 2% but my Medicare increased by 22% for a net gain of only $8.10 (.005%).  Why does the government even bother with all these changes since the end result is that you net out no increase or just a small fraction of the actual increase?  Makes no sense to me.  Thanks for your column. I enjoy it.
Signed: Disillusioned
Dear Disillusioned:
I must say I fully appreciate your point; I too received none of the 2017 Cost of Living Adjustment (COLA) and only a small part of the 2018 increase.  And although I know it’s very little consolation, millions of others like us are in the same boat.  What it boils down to is that healthcare costs (thus Medicare Part B premiums) are rising more than, and faster than, the inflation index used to compute Social Security COLA increases.  Social Security and Medicare are two entirely different programs and, even though Medicare premiums are usually automatically deducted from Social Security payments, this is done as a convenience.
The Medicare premium deducted from your Social Security benefit goes directly to Medicare, not to Social Security.  Think of it this way: If you paid for your Medicare Part B premium separately rather than by a deduction from your Social Security benefit, for years you would have been paying Medicare the full Part B premium amount, which was more than you have been paying via deduction from your Social Security benefit.  This is because there’s a rule which states that your Social Security benefit can’t go down because of a Medicare premium increase, and many of us (including me) were paying an artificially lower than normal Medicare premium.
But the same law which says that your Social Security benefit can’t go down also says that any increase in your Social Security benefit can be used to bring your Medicare premium up to, or closer to, the standard Part B premium amount ($134 per month in 2018), and this is why so many of us have seen all or most of our COLA increases going to Medicare.
Note too that the COLA increases we are seeing in recent years (or not seeing in the case of 2010, 2011 and 2016) have been much lower than in years past because inflation has been so low for so many years (at least as measured by the Consumer Price Index).
So while I share your frustration, I hope that since we’re both now paying the full Medicare Part B premium each month via Social Security, that perhaps next year we’ll be able to get the full amount of any Cost of Living Adjustment that is made to Social Security.  That is, of course, if there is a COLA increase and also if there is no increase in the Medicare Part B premium (and the latter is doubtful).
In case you missed it, here’s a link to an article I recently wrote about this whole situation.

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