But the grounds aren’t great for seniors.
Biden has signaled for months that he is taking aggressive action to combat inflation, which rose to 8.2 percent in the 12 months to September. That’s in sharp contrast to the 1 to 2 percent inflation rate that was the norm for the previous decade. Prices rose 9.1 percent in the 12 months to June.
The reason for the rising Social Security payments is that, unlike virtually all pensions, Social Security benefits are adjusted each year to keep pace with inflation as measured by the Department of Labor’s Consumer Price Index (CPI-W). Therefore, the benefits are constantly increasing, making it very valuable for retirees.
On Oct. 13, the Social Security Administration announced that benefits would increase 8.7 percent, an average increase of more than $140. That sounds like a lot, but in theory it can only keep seniors up with the rise in the cost of living.
Whether CPI-W is the appropriate mechanism for such annual adjustments is controversial. The CPI is based on household surveys and measures the increase in the cost of a shopping cart purchased by urban consumers. The BLS has often toyed with the formula, sometimes under pressure from lawmakers worried about the federal budget deficit, fearing the measure would overstate inflation. During the 1990s, technical adjustments to the BLS reduced the annual CPI inflation rate by almost a full percentage point. Without these adjustments, Social Security benefits would be even higher today.
In addition, other measures of inflation, such as one that measures costs for producers or one that measures prices for both urban and rural consumers, might more accurately reflect changes in the cost of living.
The reality is that if Biden and the Federal Reserve’s anti-inflation efforts were more successful, Social Security benefits wouldn’t rise as much.
Medicare Part B is the portion of the elder health program that includes medical and outpatient services. Seniors pay a monthly fee. Biden is right that the premium will fall next year. Premiums were $170.22 per month in 2022 and will be $164.90 next year. That’s a drop of about 3 percent.
That sounds like good news. But premiums had skyrocketed in 2022, rising $21.60, or 14.5 percent, one of the largest increases in recent history. The premiums had been $148.50 in 2021.
In other words, while premiums are down slightly in 2023, they’re still $16.40 higher than in 2021. That’s an 11 percent increase over two years.
The annual deductible would also be reduced from $233 in 2022 to $226 in 2023, a decrease of $7. But again, the annual deductible had increased by $30 the year before. All in all, the deductibles are also 11 percent higher than two years ago.
The Centers for Medicare & Medicaid Services said they raised premiums so much in 2022 in part because they had to build reserves to cover a new Alzheimer’s drug given by a doctor in a clinic or hospital. The drug, known as Aduhelm, was expected to cost $56,000 a year. But then the manufacturer Biogen almost halved the price – to $28,200. That left the program with excess reserves that are now passed on to those with Medicare Part B coverage.
But for seniors, modest cuts next year won’t offset last year’s steep increases.
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