The Social Security Administration is set to announce its annual cost of living adjustment (COLA) for 2016 on Thursday. The adjustment will likely see benefits stay stagnant, even as Medicare is set to increase premiums and deductibles for outpatient care and prescription medications.
Social Security COLAs are based on federal estimates of inflation. Cheap gasoline has depressed the Consumer Price Index, the government's measure of inflation, despite the fact that healthcare and housing costs have increased.
Lower gas prices mean that seniors will not see their Social Security benefits increase next year, marking the third time that Social Security benefits have stagnated since COLAs were implemented in 1975.
Since 1975, COLAs have averaged 4% per annum. The average monthly Social Security payment was $1,224 in 2015, following a COLA of 1.7%.
No COLA for Social Security recipients effectively means that Medicare Part B premiums will increase for a substantial proportion of beneficiaries. Part B covers palliative medical services, supplies and preventive care.
The increases will not affect all Social Security recipients equally, however; recipients who opt for automatic deductions from Social Security payments are protected by a federal "hold-harmless" law that keeps their benefits steady regardless of rising Medicare premiums.
Recipients who opt out of automatic deductions from Social Security (or about 30% of Medicare beneficiaries) will have to pay higher monthly premiums for Part B coverage starting next year.
Premiums for Part B coverage could increase by $54 per month for recipients who opt out of automatic deductions while annual deductibles could increase by $73 for all beneficiaries.
Adding insult to injury, premiums for the top ten prescription drug plans (PDPs) covered by Medicare's Part D are set to increase by 8% or more in 2016 according to findings reported by Avalere Health.