From an email I received from an advisor to the Oklahoma Department of Human Services:

For only the third time in 40 years, the nation’s elderly and disabled Social Security recipients will not receive an increase in benefit payments next year.  However, as a direct result of this about 30 percent of Medicare are facing a staggering 52 percent increase in their Part B premiums and all beneficiaries will see a similar hike in their deductible unless Congress or the administration acts to change things.

With consumer prices down over the past year, in large part thanks to low gas prices, there is no cost-of-living adjustment (COLA), meaning that monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 65 million Americans will stay at 2015 levels for 2016.  The average monthly Social Security retirement payment will remain $1,328 a month for individuals and $2,176 for couples. The maximum Social Security benefit for a worker retiring at full retirement age, which is age 66 for those born between 1943 and 1954, will also stay at $2,663 a month.

Other figures remain at 2015 levels as well, including the maximum amount of earnings subject to Social Security taxation and the income thresholds determining benefit reductions for those who retire early but still earn some income.  The monthly federal SSI payment standard will remain $733 for an individual and $1,100 for a couple.

Given the lack of a COLA adjustment for the nation’s elderly and disabled, some are calling for a re-thinking of how the cost of living for Social Security recipients is calculated.  It is currently based on the cost of a market basket of goods and services purchased by working people, who are younger and spend less on health care, which rises faster than inflation. Reuters columnist Mark Miller suggests changing the inflation gauge used for the COLA to the Consumer Price Index for the Elderly (CPI-E), which reflects the greater role of health care costs in spending by seniors.

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The fact that Social Security benefits are not rising means that most Social Security recipients who are also Medicare beneficiaries will not see an increase in their Part B premium, which has held steady at $104.90 since 2013.  By law, if Social Security benefits don’t rise, Medicare’s premiums can’t, either.  But this “hold harmless” provision does not apply to about 30 percent of Medicare beneficiaries: those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and “dual eligibles” who get both Medicare and Medicaid benefits.

These unprotected Medicare beneficiaries are currently looking at their monthly Part B premium jumping to $159.30, while some high-income retirees could pay as much as $509.80 a month.  In addition, the Part B deductible for all beneficiaries would rise to $223 next year, from $147 in 2015.

Why are premiums going up so precipitously for these 30 percent of beneficiaries?  Because another law says that premiums must cover increases in Medicare costs.  With 70 percent of Medicare recipients shielded from any premium increase because Social Security benefits are not rising, the entire obligation of paying for the increased Medicare costs is falling on the other 30 percent who are not protected from premium increases.

If you are on a fixed income, or if you are looking for your parents, then these issues will be front and center as you make decisions for the next year. Now may be the time to plan for your estate as well as those long-term care costs. If you mention this post, I will give you a complimentary consultation to discuss your estate planning needs.