
Federal forecasts from the Obama administration and the Congressional Budget Office predict that Social Security recipients will not be receiving an increase in their benefits in 2010, and possibly 2011. Beneficiaries have received automatic cost-of-living adjustments (COLA) every year since 1975.
It would result in major implications for Medicare because the COLA puts a cap on premiums for Part B of Medicare, which covers a physicians’ services. And if there is no COLA for Social Security, about 75% of beneficiaries will not see any change in their basic Part B premiums, according to federal officials. However, some beneficiaries are without this protection and could face substantial increases in their Part B premiums.
Inflation is good for people on fixed incomes, but it is creating political and policy problems for Congress, which is just learning of the implications for Social Security and Medicare.
In addition, millions of beneficiaries could see higher premiums for drug coverage, provided under Part D of Medicare.
Medicare’s hospital insurance trust fund is deteriorating because of the recession, according to officials. Medciare has reduced payroll tax revenues in response to the concern. The tax revenues represent the main source of money for the fund. Spending on Social Security and Medicare totaled more than $1 trillion last year, accounting for more than one-third of the federal budget.
Most recipients of Medicare have Part B premiums deducted from their monthly Social Security checks. These premiums have historically increased much faster than Social Security benefits.
Under federal law, most Medicare beneficiaries have some protection. Their basic Part B premiums cannot rise more than the dollar amount of the cost-of-living increase in their Social Security checks. So if there is no COLA, their basic Part B premiums will not increase. However, one-fourth of Medicare recipients are not protected by law, and these folks could see their premiums increase.
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