Social Security COLA increases aren't keeping up with rising costs
January 1, 2022 | View PDF
Editor’s note: This press release was received on Dec. 8, 2021.
If the annual Social Security cost of living adjustment (COLA) did a better job of keeping pace with Medicare Part B premiums, benefits over the past decade would be 42 percent higher in 2022, according to a new analysis by The Senior Citizens League (TSCL).
“Medicare Part B premiums are the fastest growing cost that most older Americans face in retirement, but those costs aren’t fairly accounted for by the method used to adjust Social Security benefits for inflation,” says Mary Johnson, a Social Security and Medicare analyst for The Senior Citizens League (TSCL).
The Social Security Administration reports that most beneficiaries will receive a COLA high enough in terms of dollars to cover the Part B increase. “But the failure to account for this expenditure in the COLA has been a major source of erosion in the buying power of Social Security benefits,” Johnson says.
Social Security benefits will increase 5.9 percent, effective with the check received in January of 2022. But despite it being the highest COLA in four decades, the Medicare Part B premium increase is even greater, 14.5 percent — about 2.5 times faster.
“Surely there are many others like me who wonder how much higher Social Security benefits would be if our benefits were tied to the percentage of increase in Medicare Part B premiums instead of the consumer price index.” Johnson said.
The new analysis by Johnson found that, had Social Security COLAs equaled the percentage of increase in Medicare Part B, from 2013 to 2022, a benefit of $1,155 would be about $593 per month higher in 2022 ($7,116 more for the year). Had the COLA equaled the increase in Part B premiums, retirees with an average benefit of $1,115 per month in 2012 would have pocketed an extra $32,608 from 2013 through 2022.
The 2022 Medicare Part B premium will increase by $21.60 per month from $148.50 to $170.10 in 2022. As high as this premium increase is, Medicare premiums routinely have increased about three times faster than COLAs over the past decade. From 2013 to 2022 the COLA increased benefits by 18.8 percentage points while Medicare premiums grew by 57.2 percentage points. This was the case even though Part B premiums did not increase at all three times during the past decade and by just 1.1% in 2019.
Ignoring increased premiums
“Our annual COLA is shortchanging and failing the very people it’s supposed to protect,” Johnson says. The Social Security COLA is provided to protect the buying power of benefits, but the COLA doesn’t account for Part B premiums. The annual inflation adjustment is based on the price changes of goods and services used by working adults younger than age 62, and does not include price changes experienced by retired Americans who receive Medicare.
According to research by Johnson, Social Security benefits have lost 32 percent of their buying power, over the past 21 years. “We expect that loss to deepen, particularly if inflation continues into 2022,” Johnson says.
The Social Security Administration announced it is in the process of mailing out notices to Social Security recipients that explains the amount of the individual’s benefit increase in 2022, and the amount of Part B premium that will be deducted from benefits. For those who want to know their new benefit amount sooner, that information can be obtained online by setting up or checking your existing mySocialSecurity account.
The Senior Citizens League has proposed a one-time $1,400 stimulus check for Social Security recipients to better help people living on fixed incomes cope as costs and prices continue to rise. The online petition and has over 93,000 signatures. The organization launched a national mail campaign to supporters and is collecting signatures that way as well.
For details, visit http://www.SeniorsLeague.org.