Trustees: Meager hike in Social Security benefits next year

Trustees who oversee the nation’s entitlement programs said in two new reports that they expect Social Security’s cost-of-living-adjustment (COLA) increase to be 0.2% next year, based on “intermediate assumptions”.

Medicare Part B, meanwhile, which helps seniors pay for doctor’s bills and outpatient expenses, is funded by a combination of premium payments and money from general federal revenue. After that, beneficiaries would face an across-the-board cut in their monthly payments if Congress doesn’t act.

The trustees also project a 5.6 percent jump in cost of the Part D prescription drug program.

“Lawmakers should address these financial challenges as soon as possible”, the trustees say in their report.

More than 49 million Americans collected Social Security retirement benefits past year, 10.8 million received disability benefits and 55.3 million were covered under Medicare, The Wall Street Journal reports.

Advocates complained that the government’s measure of inflation – the Consumer Price Index for Urban Wage Earners and Clerical Workers – doesn’t adequately reflect the prices that older Americans pay.

The COLA news underscores the need to revisit Social Security’s formula for keeping seniors even with costs – and it will provide fresh fuel for proponents of a broader expansion of benefits as part of any eventual program reform. It comes after retirees received no increase in benefits in 2016 for the third time in four decades. Per-enrollee Medicare spending growth has been averaging 1.4% over the past five years, which is lower than GDP growth. “With the small, temporary reallocation of the Social Security contribution rate, the DI fund will now be able to pay full disability benefits until 2023, and the retirement fund alone will still be adequate into 2035, the same as before the allocation”.

Social Security’s overall health did not change much in the past year.

The U.S. government spent $648 billion on Medicare in 2015, representing 3.6% of the nation’s gross domestic product, according to the report. After its inpatient care trust fund runs dry in 2028, Medicare would only be able to pay 87 per cent of projected costs. Experts who advise the trustees said the change of insolvency dates was mainly technical, due in part to lower-than-expected income from payroll taxes.

Almost a third of all Medicare beneficiaries face a steep increase in their premiums next year, the result of a policy that in certain circumstances requires some beneficiaries, including higher earners, to shoulder the burden of rising costs.