Annual cost-of-living adjustments are one of the biggest advantages of social security. When inflation is high, the COLAs cause monthly checks to rise in January to help retirees keep up with the cost of living. Early estimates show that the COLA that will take effect in early 2023 will be between 8% and 9%.
The good news is that Social Security recipients are more likely to see the full amount of their cost-of-living adjustment in their bank accounts than in the previous year. The impact of another key program for older Americans, Medicare, is likely to reverse the pain it caused last year.
About 70 million Americans will benefit from the 5.9% COLA that took effect at the beginning of the 21st century. The upward adjustment boosted the average Social Security retiree's monthly benefits by about $90.
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Those who were eligible for those benefits didn't see their checks go up as much. Those who enroll in Medicare have their premiums automatically deducted from their Social Security account.
The increases in Medicare costs for retired people were very high. The Medicare Part B premiums went up by 18.7% in the year after that. Out of the $90 average benefit boost, that took away $22.10 per month.
Much of the increase came from a single factor, according to the Centers for Medicare and Medicaid Services. The program anticipated that it would be able to cover the full cost of the drug for Medicare participants. The estimate was included in the Part B premium.
The price of Aduhelm was slashed almost in half by Biogen before it blinked. Patients in authorized clinical trials were limited by the Medicare program.
The Secretary of Health and Human Services told Medicare participants that it wouldn't be possible to lower premiums in the middle of the year due to legal and operational hurdles. The lower expenses related to Aduhelm will cause the Part B premium to be adjusted downward.
The downward impact on Medicare premiums was estimated to be between $5 and $10 per month. If the monthly impact of the COLA turns out to be in 2023, that could add another $5 to $10 to the monthly cost of living adjustment.
Inflation hasn't been immune to healthcare costs. The price of medical-care services went up in August despite the fact that inflationary pressures waned.
The 12 month increase was 5.6%. It could limit any downward adjustment of Medicare Part B premiums due to the Aduhelm situation.
Many Social Security recipients will be happy to keep the entire amount of the cost of living adjustment in their monthly benefits. If a reduction in Medicare-related deductions adds to their checks, it would just be icing on the cake.
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