No 2010 COLA Planned
May 1, 2009
Author: Catherine M. Callery (Kate)| Louise M. Tarantino
And we are not talking about the tax on sugary soft drinks proposed by New York Governor Paterson as a method for closing the State’s budget gap. We are talking about that sacred cow, annual cost of living adjustments (COLA) in the Social Security programs linked historically to increases in the Consumer Price Index (CPI). The problem is, the CPI has been going down, not up, and this decrease will affect COLAs in government programs in 2010, and probably in 2011 as well.
Federal law stipulates that most Social Security beneficiaries cannot have their Medicare Part B premiums increase by more than the dollar amount of the cost-of-living increase in their Social Security checks. As a result, about 75% of beneficiaries’ Medicare Part B premiums will remain the same. However, about 25% of Medicare beneficiaries are not protected by this law and could see their premiums increase. Most Medicare beneficiaries pay a monthly Part B premium of $96.40 in 2009. The basic premium will likely rise to $119 next year and to $123 in 2011 for those not protected by the law. In addition, millions of beneficiaries also could experience higher premiums for drug coverage under Medicare Part D because there are no laws that prevent such an increase.
No Social Security COLA and projected increases in drug premiums will create a perfect storm for the first ever reduction in Social Security benefits. Explaining this one to retired parents on Social Security will not be a pleasant task!
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