Last week, the Social Security Administration announced that there would be no annual cost-of-living adjustment (“COLA”) for Social Security beneficiaries next year because the overall general inflation rate, based on the consumer price increase (“CPI”), has been negligible this year.  However, the rate of medical inflation is higher (historically, about 3 times the general rate), and most people on Social Security (the elderly and disabled) need more health care than the average working-age consumer.  The pressure on their monthly checks to cover medical out-of-pocket costs will increase next year regardless.  Half of all people on Medicare live on less than $24,000/yr.  This problem is nothing new, sad to say, but there is a simple policy solution: use a different COLA base formula (known as the “CPI-E”) that better reflects health care costs for seniors and people with disabilities.

This coming year, there will also be an additional, very serious problem for a significant number of Medicare beneficiaries: a skyrocketing Part B premium, from the current ~$105/mo.in 2015, to nearly $160/mo in 2016, a whopping 52% increase.

Here’s the underlying dynamic:

About 70% of Medicare beneficiaries will experience no Part B premium increase next year because of a “hold harmless” provision of the Social Security Act that prevents such an increase when there is no annual increase in monthly Social Security benefit checks.  This is a good protection for them.  Had an increase been assessed on all beneficiaries across the board, the premium would have increased to $121 (an amount that is significant for those living on low and fixed incomes.)

However, because by law 25% of the total cost of the Medicare Part B program must be borne by beneficiaries in total, the remaining 30% of beneficiaries not protected by the hold-harmless provision must make up the entire difference, consequently having to pay for the entire cost of the increase for the program, which will go up because of the higher medical inflation rate.  This 30% will be comprised of new beneficiaries (who become eligible and enroll in 2016), people on Medicare who don’t receive Social Security benefits, Medicare beneficiaries who already pay higher, non-standard, income-related premiums because they have above-average incomes, and people who are on both Medicare and Medicaid.  (Fortunately, this latter category will not experience the increase directly because state Medicaid programs will cover it for them.)

Two bills have been introduced in Congress to mitigate this tremendous increase next year for the unlucky 30% who aren’t “held harmless” under current law when annual Social Security COLAs are not granted.  The “Protecting Medicare Beneficiaries Act” (S.2148) has been introduced by Sen. Ron Wyden (D-OR), the ranking member on the Senate Finance Committee, which has jurisdiction over Medicare.  In the House of Representatives, Rep. Dina Titus (D-CA) has introduced the “Medicare Premium Fairness Act” (H.R. 3696.)  Both would cancel the Part B premium increase for those beneficiaries not protected by the “hold harmless” provision, and cancel the increase on state Medicaid programs. Neither bill indicates how the additional cost would be paid for.  New York co-sponsors include Sen. Schumer on S.2148, and Reps. Carolyn Maloney, Sean-Patrick Maloney, Jerrold Nadler, and Charles Rangel on H.R. 3626.  Senior citizen, disability rights, and health care advocates are reaching out to Sen. Gillibrand and the remaining Congressmembers to talk about the importance of addressing this situation quickly, since there are only 2 months to go.