Social Security ’21 Cola Increase Anemic

Published in RINewsToday.com on on October 19, 2020

With the Social Security Administration’s (SSA) announcement of next year’s Social Security and Supplemental Security Income’s (SSI) meager cost-of-living adjustment (COLA), over 70 million beneficiaries will only see an increase of 1.3 percent in their monthly checks in 2021.  Last year’s COLA increase was 2.8 percent, the largest in seven years.

According to SSA, the 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million Supplemental Security Income (SSI) beneficiaries start on December 31, 2020. 

SSA ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics. 

The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $142,800 from $137,700, says SSA.

The earnings limit for workers who are younger than “full” retirement age will increase to $18,960. (SSA deducts $1 from benefits for each $2 earned over $18,960.)

The earnings limit for people reaching their “full” retirement age in 2021 will increase to $50,520. (SSA deducts $1 from benefits for each $3 earned over $50,520 until the month the worker turns “full” retirement age.)

There is no limit on earnings for workers who are “full” retirement age or older for the entire year. 

Next Year’s COLA Increase Not Enough 

Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare (NCPSSM) calls the increase as inadequate especially for COVID-Ravaged Seniors and noted that it’s the lowest since 2017.  

“The timing could not be worse. The COVID pandemic has devastated many older Americans both physically and financially.  Seniors living on fixed incomes need a lifeboat; this COLA increase is more like an underinflated inner tube,” says Richtman.

The average Social Security beneficiary will see a paltry $20 month more in benefits in 2021, calculates Richtman. “This COLA is barely enough for one prescription co-pay or half a bag of groceries. Worse yet, seniors could lose almost half of their COLA increase to a rise in the Medicare Part B premium for 2021, the exact amount of which has not yet been announced,” he warns.  

“The current COLA formula – the CPI-W – is woefully inadequate for calculating the true impact of inflation on seniors’ pocketbooks. It especially under-represents the rising costs that retirees pay for expenses like health care, prescription drugs, food, and housing. We support the adoption of the CPI-E (Consumer Price Index for the Elderly), which properly weights the goods and services that seniors spend their money on,” says Richtman. 

Examining the Growth of SSA COLAs 

Social Security checks in 2020 are almost 20 percent lower than they otherwise would be, due to the long-term impact of extremely low annual inflation adjustments, according to a newly released analysis by The Senior Citizens League (TSCL).  The analysis comes as SSA announced that the 2021 COLA will be just 1.3 percent, making it one of the lowest ever paid. 

“People who have been receiving benefits for 12 years or longer have experienced an unprecedented series of extremely low cost-of-living adjustments (COLAs),” says TSCL’s Mary Johnson, a Social Security policy analyst for the Alexandria, Virginia nonpartisan senior advocacy group. “What’s more those inflation adjustments do not account for rapidly rising Medicare Part B premiums that are increasing several times faster than the COLA,” she says, noting that this causing those with the lower Social Security benefits to see little growth in their net Social Security income after deduction of the Part B premium.  

Johnson’s COLA analysis, released on Oct. 13, compared the growth of retiree benefits from 2009-through 2020 to determine how much more income retirees would receive if COLAs had grown by a more typical rate of 3 percent. TSCL’s analysis found that an “average” retiree benefit of $1,075 per month in 2009 has grown to $1,249 in 2020, but, if COLAs had just averaged 3 percent, that benefit would be $247 per month higher today (19.8 percent higher), and those individuals would have received $18,227.40 more in Social Security income over the 2 010 to 2020 period. 

During that period COLAs have averaged just 1.4 percent. In 2010, 2011, and 2016 there was no COLA payable at all and, in 2017, the COLA was 0.03 percent. “But COLAs have never remained so low, for such an extended period of time, in history of Social Security,” says Johnson, who has studied COLAs for more than 25 years.  Over the 20-year period covering 1990 to 2009, COLAs routinely averaged 3 percent annually, and were even higher before that period. 

According to Johnson, the suppressed growth in Social Security benefits not only creates ongoing benefit adequacy issues, but also Medicare budgetary programs when the COLA is not sufficient to cover rising Part B premiums for large number of beneficiaries. When the dollar amount of the annual Medicare Part B premium increase is greater than the dollar amount of an individual’s annual COLA, the Social Security benefits of about 70 percent of Medicare beneficiaries are protected by the hold-harmless provision in the Social Security Act.  The Medicare Part B premium of those individuals is reduced to prevent their net Social Security benefits from being lower than the year before, she says. 

However, Johnson notes that the people who are not covered by hold harmless include higher income beneficiaries, beneficiaries who have not started Social Security yet and who pay for Medicare by check and about 19 percent of beneficiaries whose incomes are so low that their state Medicaid programs pay their Medicare Part B premiums on their behalf. 

Johnson says, “that a provision of a recently enacted government spending bill restricts Part B premium increases in 2021. The bill caps the Part B premium increase for next year at the 2020 amount plus 25 percent of the differences between the 2020 amount and a preliminary amount for 2021.”

Don’t look for the “potential Part B spike” to go away, warns Johnson. “Unless Congress acts to boost Social Security benefits and finds a better way to adjust benefits for growing Medicare costs, this problem will continue occur with greater frequency in the future,” she says.

Fixing SSA’s COLA Problem Once and For All

During the COVID-19 pandemic seniors are relying more on their Social Security check but continue to face cost increases each year beyond the extra income provided by the COLA, says Social Security Subcommittee Chairman John B. Larson (D-Connecticut) in a statement following SSA’s announcement of its tiny 2021 COLA increase. “It’s time to fix that by enacting the Social Security 2100 Act.,” says the Connecticut Congressman calling for passage of his legislative proposal that would strengthen SSA benefits by basing the COLA on what seniors actually spend on items such as medical expenses, food, and housing. Under this new CPI-E index, a beneficiary would experience benefits that are 6 percent higher by the time they reach age 90. 

Meanwhile, Congressman Peter DeFazio (D-Oregon) sponsored and Larson, a co-sponsor, have proposed emergency legislation to increase next year’s COLA up to 3 percent. “Due to the COVID-19 pandemic, seniors are facing additional financial burdens in order to stay safe,” said DeFazio.  “This absolutely anemic COLA won’t even come close to helping them afford even their everyday expenses, let alone those exacerbated by COVID-19. Raising the COLA to 3 percent 2021 will provide seniors with an immediate, crucial lifeline during the ongoing coronavirus crisis,” says the Oregon Congressman. DeFazio’s legislative proposal, the Social Security Expansion Act, would also provide a permanent fix to the COLA formula, like Larson using a CPI-E index to factor in seniors’ actual, everyday expenses.

Medicare Takes a Blow Under GOP’s Major Tax Plan Fix

Published in the Woonsocket Call on December 10, 2017

In early December, the GOP-controlled Senate passed by a partisan vote of 51 to 49 its sweeping tax rewrite (with Republican Senator Bob Corker of Tennessee siding with the Democrats and opposing the measure), sending the $1.4 trillion tax package, detailed in a 492 page bill, to the Conference Committee to iron out the differences between the Senate and House bill, Tax Cuts and Jobs Act (H.R. 1), that was passed by a 227-to-205 vote on November 16, 2017.

While Democrats are technically part of the conference committee, Republicans are yet again hashing out the details behind closed doors on a purely partisan basis. Democrats charge that the GOP lawmakers on the conference committee will look to rubber-stamp whatever their leadership comes up with and do not expect to see any changes to the legislation for the better.

The cores of the House and Senate bills are already very similar: tax cuts for the wealthiest and corporations paid for by middle-class Americans. Republicans are rushing to get legislation to President Donald Trump’s desk for his signature before Christmas. While Trump looks forward to the first major legislative accomplishment of his presidency (once signed into law) as a Christmas gift to the nation, those opposing the massive changes to the nation’s US tax code view it as a stocking stuffed with coal.

Congressional insiders expect to see a finalized tax bill in the coming days, and votes in the House mid-next week at the earliest.

Medicare Takes a Blow

U.S. Senator Sheldon Whitehouse, sitting on the Senate Special Committee on Aging, sees the writing on the wall with the passage of the GOP tax bill. “The Republican tax plan would run up huge deficits, trigger immediate cuts to Medicare, and threaten Social Security and Medicaid down the line,” says the Rhode Island Senator.

Adds, Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare (NCPSSM), this forces the “the poor, middle class, and elderly to pick up the tab for trillions of dollars in tax breaks that the super-rich and profitable corporations do not need..” If enacted, the GOP tax fix triggers an automatic $25 billion cut to Medicare,” he warns, noting that “it blows a $1 trillion hole in the deficit, inviting deep cuts to Social Security, Medicare, and Medicaid.”

Richtman says, “adding insult to injury” both the GOP Senate and House tax bills repeal the Obamacare mandate, which will raise ACA premiums for older adults (age 50-64) by an average of $1,500 in 2019. He notes that the Senate tax bill uses the “Chained CPI” inflation index for calculating deductions and tax brackets, this “setting a dangerous precedent that could spill over into cost-of-living adjustments for Social Security.”

In her December 7 correspondence to Congressional leadership, AARP Chief Executive Officer Jo Ann Jenkins, representing millions of members who whose health care depends on Medicare, urged lawmakers to work together in a bipartisan fashion to enact tax code legislation that would meet the needs of the older population and arrive at a tax code that is “more equitable and efficient, promotes growth, and produces sufficient revenue to pay for critical national programs, including Medicare and Medicaid.”

Jenkins urged Congress to prevent $25 billion in automatic cuts to Medicare in 2018 that would result from the enactment of H.R. 1 and its $1.5 trillion deficit increase (according to the Congressional Budget Office) since it “would have an immediate and lasting impact, including fewer providers participating in Medicare and reduced access to care for Medicare beneficiaries.”

“The sudden cut to Medicare provider funding in 2018 would have an immediate and lasting impact, including fewer providers participating in Medicare and reduced access to care for Medicare beneficiaries,” said Jenkins, who warned that health care providers may choose to stop accepting Medicare patients at a time when the Medicare population is growing by 10,000 new beneficiaries each day.

Jenkins also expressed her concern that Medicare Advantage plans and Part D prescription drug plans may charge higher premiums or cost-sharing in future years to make up for the cuts now.

The Devil is in the Details

On the AARP website, Gary Strauss, an AARP staff writer and editor, posted an article on December 6, 2017, “Your 2018 Taxes? Congress Now Deciding,” that identifies specific GOP tax bill provisions that hit older tax payers in their wallets.

According to Strauss, an AARP Public Policy Institute analysis also found that more than one million taxpayers 65 and older would pay higher taxes in 2019, and more than 5 million would see their taxes increase by 2027. More than 5 million seniors would not receive a tax break at all in 2019, and 5.6 million would not see their taxes decrease by 2027.

The House and Senate tax bills also have differing views on the medical expense deduction, used by nearly 75 percent of filers age 50 and older, says Strauss. The Senate plan allows taxpayers to deduct medical expenses exceeding 7.5 percent of their income rather than a current 10 percent — for the next two years. The House tax plan eliminates this deduction. Some 70 percent of filers who use the deduction have incomes below $75,000.

Strauss says that the House bill eliminates the extra standard deduction for those age 65 and up, while the Senate bill retains it. For 2017, that’s $1,250 for individuals, $1,550 for heads of households or $2,500 for couples who are both 65 and older. .

Both Senate and House versions abolish state and local tax deductions, with the exception of up to $10,000 in property taxes. Residents in high-tax states such as California, Connecticut, New Jersey and New York, would pay higher taxes, adds Strauss.

For home owners, Strauss notes that the Senate plan leaves interest deduction limits at $1 million, while the House bill lowers the mortgage interest deduction limit to $500,000 and no longer allows it to be used for second homes, says Strauss.. Individuals would also continue to get up to $250,000 tax-free from the sale of a home (up to $500,000 for couples). But, both bills require sellers to live in the property five of the eight years prior to a sale, up from the current requirement of two of the last five years,” adds Strauss.

At press time, dozens of newspapers are reporting that Americans across the nation are protesting the passage of GOP tax bill that makes the biggest changes to the U.S. tax code in 30 years, calling it a “scam.” AARP and NCPSSM are mobilizing their millions of members to protect Medicare, Social Security and Medicaid.

While Trump told Senators at a lunch meeting held on December 5 at the White House that the Republican tax plan was becoming “more popular,” two recently released polls are telling us a completely different story. According to a Gallup national poll, a majority of independents (56 percent) join 87 percent of Democrats in opposing the tax plan. Only 29 percent of Americans overall approve of the proposed GOP changes to the nation’s tax code. Reflecting Gallup’s finding, the Quinnipiac University national poll found that 53 percent of American voters disapprove of the tax plan, while only 29 approve.

With mid-term Congressional elections less than a year away, Trump and the GOP-controlled Congress continued push to dismantle Obamacare, leaving millions without health care coverage and creating a tax code that would destroy Medicare, may well bring millions of older taxpayers to the polls to clean house. We’ll see.