TIME GOES BY | No Social Security COLA for 2011

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By now, you probably know that for the second year in a row, there will be no Social Security cost-of-living adjustment (COLA) for 2011. At first, I shrugged in resignation (“what else is new these days?”) because it doesn't affect me much.

I may nearly pass out at the price of blueberries at the grocery ($4.99 for six ounces last week) but it is well offset by the amazingly low price of red bell peppers (89 cents each) at one of the stores I frequent. I take only one prescription drug, a generic I get for $5 a month and I doubt heating during the upcoming season could possibly cost as much in my new home in Oregon as fuel oil did in Maine's longer, frigid winters. So no COLA doesn't affect me much, assuming I remain healthy.

Then I looked into it further.

Although it is true that inflation in the past year has been generally flat, that isn't so for elders who spend a larger portion of their income on health care than younger people. Health care costs, according to the Bureau of Labor Statistics (BLS), is up 3.4 percent from a year ago.

The premium for my supplemental coverage increased three percent for 2010, and I don't know yet how much it will go up for next year. There is also a question of prescription drug coverage premiums for 2011. Last year, mine doubled and added a deductible. Then there are, of course, co-pays.

I'm sure you have stories of your own to tell about your health care costs.

Some good news for people whose drug costs are high enough to fall into the doughnut hole, there are no changes scheduled for 2011 except that a 50 percent discount on brand name drugs is now in effect during the doughnut hole period.

According to the National Committee to Preserve Social Security and Medicare (NCPSSM), beneficiaries now spend an average of nearly 30 percent of their Social Security income on Medicare Part B, Part D and out-of-pocket costs. Consider that the average Social Security benefit is $1172 per month which would leave $703.20 for everything else.

In that case, a 3.4 percent increase in health care costs, which doesn't sound like much, is devastating.
In addition, a study [pdf] by the Center for Retirement Research at Boston College reports that for people 65 and older in the lower third of income distribution, Social Security benefits account for 84 percent of their income which has an “enormous impact on whether households fall above or below the poverty line.”

Don't ever forget that no one ever got rich on Social Security. It is intended to provide for basic needs and for 75 years it has helped keep millions of beneficiaries from poverty.

Last year, Social Security beneficiaries received a one-time $250 additional payment. Among all the controversy about the federal stimulus package, the Economic Policy Institute reported in September that although its share of the Recovery Act was very small,

"...this lump-sum payment was one of the quickest-acting components of the overall package - the majority of payments were received just months after the Act was passed (by the end of May 2009).
“This Social Security and SSI payment by itself likely boosted GDP by roughly 0.5% in the second quarter of 2009, which would roughly translate to about 125,000 jobs created or saved due to these payments."

So what is good for elders is also good for the economy.

There is legislation in Congress that would grant another one-time Social Security benefit of $250 in 2011. Both House Leader Nancy Pelosi and Senate Leader Harry Reid have pledged to bring this to a vote after the November election, and President Obama has said he will press Congress for this stimulus.

Noting that “seniors are paying more for utilities and food, experiencing longer periods of unemployment, and spending more on health care and prescription drugs,” AARP has posted a form on their website you can use to urge your congress members to provide elders with “immediate relief.” You can use the letter as is, edit it or delete it and write your own

Letter - Hard Times for Retirees - NYTimes.com

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by Tom Nelson, Chief Operating Officer, AARP

To the Editor:

Re “Adjusting to Reality,” by Alicia H. Munnell and Andrew G. Biggs (Op-Ed, March 8), opposing a proposed onetime $250 payment to Social Security recipients to make up for the lack of a cost-of-living adjustment this year.

The article demonstrates the inadequacy of using textbook economics to discuss the actual experiences of real people. By arguing — despite the biggest economic downturn since the Great Depression — that “retirees did all right over the last few years,” the authors demonstrate a lack of understanding of the negative impact of decimated retirement savings on older Americans.
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TIME GOES BY | GRAY MATTERS: Some Basics

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by Saul Friedman

This is a good time, before the year is out, to catch up on some things financial that older Americans need to know. Much can be left to your adviser or accountant, but these days it’s better if you understand and have a hand in your finances and what’s going on with your Social Security and Medicare benefits.

Social Security
As you’ve probably heard, there will be no cost of living adjustment (COLA) or increase beginning in January for Social Security beneficiaries. This is a first, but it’s difficult to complain; the COLA in 2009 was a healthy 5.8 percent, the highest since 1982, and many Americans who worked (if they did) did not see that sort of increase in their wages, if any.

I know that the actual cost of living – housing, food, medical care and drugs - grew faster for older people than the official Consumer Price Index, which has been flat during this recession. The same inequity is involved in calculating poverty levels, which cheats some people out of benefits. Several members of Congress have promised legislation to change the CPI for the benefit of older consumers, but it won’t happen anytime soon.

Medicare
President Obama has said he’s considering a flat payment of $250 for every beneficiary in lieu of the COLA and Congress may stir to act on this. For most beneficiaries, the lack of a COLA increase means that the present Medicare Part B monthly premium of $96.40 cannot be raised because of what are called the “hold harmless” provisions in the law which say your Social Security benefits cannot be reduced.

However, for newcomers to Medicare, the standard Part B premium next year will be $110.50. And because of the Medicare Part D law of 2003, the program now provides means testing for the first time whereby more affluent beneficiaries will pay still higher premiums.

Thus, the premium for individuals with yearly incomes between $85,000 and $107,00 will be $154.70; between $107,000 and $160,000: $221; between $260,000 and $214,000: $287.30; greater than $214,000: $353.60. For couples filing joint returns, double all these income numbers to find your premium.

There are other Medicare numbers for next year: The Part B yearly deductible (now at $110) is going up to $155. While Medicare pays 100 percent of the first 20 days of skilled nursing care (usually after a hospital stay of at least three days), the co-insurance for days 21 to 100 will be a hefty $137.50 a day, which is why Medicare cannot be considered long term nursing care.

The Part A hospital deductible is going up to $1,100 per spell of illness. Hospital stays for the first 60 days are fully covered, but co-insurance is $275 a day for days 61 to 90 and $550 for days 91 to 150.

The 2010 resource limits, recently announced, for the full Low Income Subsidy to pay for Part D premiums and other costs are $8,100 for an individual and $12,910 per couple. And for the partial subsidy, $12,510 for an individual and $25,010 if married.

While Medicare does not cover long term nursing care, it does cover most of the costs of medical care for nursing home residents or during home care. Medicaid, the federal program administered by states, will cover nursing care and in a future column, we’ll explore planning for Medicaid when a loved one needs nursing care and while the spouse remains at home.

There’s been some talk on Capitol Hill that the health care reforms now before the Congress may eliminate some higher Part B premiums which, I believe, were approved by the Republican Congress in 2003 to encourage more affluent people to desert Medicare for private insurance.

One more Medicare note: Under the law, Part B premiums must pay for one-quarter the cost of Medicare services for doctors and other outpatient services. Because the Congress is expected to cancel scheduled cuts and raise fees for doctors, the Associated Press and critics of health reform have reported that this would result in higher Part B premiums during the next ten years.

The one-quarter rule and rising doctor fees have been responsible for past premium increases, but David Certner of AARP told me that the increase in the fees for doctors will be offset by other savings in the Medicare program and premium raises will be held down. We’ll see.

Mandated IRA Withdrawals
On another money issue, my sources in Congress tell me that the IRS will NOT suspend for another year, the requirement that persons over 70-1/2 must, during the year, withdraw from their IRAs and other tax-deferred savings plans a certain amount of money, based on one’s age. It’s called the Required Minimum Distribution (RMD).
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Cash for Seniors Proposal Touches Off Dispute - NPR

H.R. 3672: Social Security COLA Fix for 2010 Act (GovTrack.us)

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To provide for an increase of $150 in social security benefits for one month in 2010 to compensate for the lack of a cost-of-living adjustment for that year, and to amend title II of the Social Security Act to eliminate the requirement that there be a social security cost-of-living adjustment for an adjustment in the contribution and benefit base to occur.

Sponsor: Rep. Carolyn McCarthy [D-NY4]

Cosponsors: Robert Andrews [D-NJ1],Jerry Costello [D-IL12],Marcia Fudge [D-OH11],Marcy Kaptur [D-OH9],Patrick Kennedy [D-RI1]

Full Text

Status:
Introduced Sep 29, 2009
Referred to Ways and Means Committee

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