The Truth About 2019's Social Security Cost-of-Living Increase
What the 2.8 percent bump will really mean for retired Americans
(The following article originally appeared on the PBS NewsHour site.)
The nation’s 67.6 million Social Security beneficiaries will receive a 2.8 percent cost next year, the Social Security Administration announced recently. That translates to a monthly boost of $39 to a total of $1,461 for the average beneficiary. But as economics correspondent Paul Solman has reported, that increase could largely be offset by an increase in health care costs.
So what will the change mean for your pocketbook? Paul connected with NewsHour columnist Philip Moeller to discuss.
This conversation has been edited for clarity.
PAUL SOLMAN: Phil, I just got this email, from The Senior Citizens League, a nonprofit organization advocating for senior citizens.
“More than 5 million Social Security recipients with the lowest benefits are unlikely to see any net growth in their monthly checks after deduction of the Medicare Part B premium in 2019, according to a new analysis released by The Senior Citizens League. This will occur despite their receiving the highest cost-of-living adjustment (COLA) in seven years.” (The Senior Citizens League later said initial estimates were off. The actual number of Social Security recipients that would not receive a COLA is 2 million, not 5 million.)
Can you explain this? Won’t the people affected be seriously upset? Or does no one running for office care, because they don’t vote?
PHILIP MOELLER: A 2.8 percent COLA for next year is pretty good news for most Social Security recipients, but it might not be good news for all of them.
The Senior Citizens League’s dramatic headline is based on the 2018 Medicare Trustees’ report that was released last summer. Medicare announced it is increasing the Part B premium from $134 this year to $135.50 next year. That’s not much of an increase, but for the folks receiving the smallest Social Security benefit, increasing their benefit next year by 2.8 percent will generate less than $1.50 more in benefits each month. In other words, the gains from their COLA would be wiped out by higher Medicare premiums.
PAUL SOLMAN: So their Social Security checks won’t go up?
PHIL MOELLER: Right, and that’s a sad commentary on how tough it is for many older Americans, particularly since studies show that the lowest-income beneficiaries depend on Social Security for at least 90 percent of their retirement income.
However, that $1.50 rise in Part B premiums was hardly set in stone. The Department of Health and Human Services, which oversees Medicare, would have been well within its authority to hold 2019 Part B premiums at the same $134 they are now. Given the upcoming midterms, I would not have been surprised if the Trump White House had decided to “give” seniors an election present in the form of no boost in that Medicare premium.
I’m sure you would be as shocked as I if this White House had used its authority for such a naked election-based policy?
PAUL SOLMAN: As to the White House potentially playing politics with the provision, what else would be new? Doesn’t it always, to some extent? However I doubt there is enough incentive, given that people with the most risk, the poor, tend not to vote.
PHILIP MOELLER: I understand your cynicism, but keeping the Part B premium unchanged easily could have generated the talking point that Medicare expenses did not rise under Trump’s leadership. This statement would have been false but, as you say, what else is new?
PAUL SOLMAN: I wonder what percentage of the estimated 2 million people at risk of no COLA raise are minorities. Since minorities overwhelmingly vote Democratic, why would we have expected a Republican administration to be responsive to them, even if they did vote? And, in the end, as we learned, it wasn’t.
PHILIP MOELLER: Not particularly. But the logic this administration uses to explain itself (the most recent of which was Trump’s op-ed in USA Today) lets the president say he kept his campaign promise to protect Medicare. In fact, he’s done anything but that.
PAUL SOLMAN: Can you explain this so-called “hold harmless” Medicare Social Security provision? I co-wrote a Social Security book with you and Larry Kotlikoff, and I still have trouble remembering the mechanics.
PHILIP MOELLER: In brief, there is a Social Security rule that says that benefits cannot decline from one year to the next. This includes the impact of Part B premiums. Annual COLAs normally were large enough for people to pay any higher Part B premiums and still see their Social Security benefits increase. But we’ve had three years with a zero COLA since 2009 and one year it was only 0.3 percent. In these years, the hold-harmless rule was invoked. This meant that many people did not have to pay those higher Part B premiums.
Last year’s 2 percent COLA permitted Medicare to play catch up. Many people thus saw most, if not all, of their 2 percent COLAs used to pay higher Part B premiums. People with higher benefits were all paying full Part B premiums last year, so nearly all of this year’s COLA will go toward higher benefits. But lower-income beneficiaries who were still paying below normal Part B premiums will see a larger share of the COLA used to restore their Part B premiums to the level that most people pay.
What’s your advice here about how to improve how the program protects our most vulnerable older citizens?
PAUL SOLMAN: The obvious answer is to make benefits even more progressive, rewarding workers with lower earnings at a higher rate than those with higher earnings. But unless the money comes from the latter, Social Security would become more expensive than it currently is. That would be a major talking point for those who want to privatize or otherwise gut the program.
Social Security supporters have long worried that any tilt away from the current system in favor of the disadvantaged, if it comes from the pockets of the everyone else, will undermine support for Social Security as is.
PHILIP MOELLER: Well, as seems clear, opponents don’t seem to need ammunition or facts to support privatization efforts.
This is a topic we should revisit after the midterm elections. If Democrats gain control of the House, we can expect proposals to expand benefits to get a lot more air time.
PAUL SOLMAN: Agreed.
Editor’s note: This exchange has been updated to reflect the increase in Medicare Part B premiums recently announced.