Health care costs continue to rise in the United States, which means Medicare premiums will also continue to rise.
The Centers for Medicare and Medicaid Services announced that premiums for Medicare Part B are once again set to increase. The 2021 standard monthly premium for Medicare Part B will be $148.50, a significant increase from the current monthly premium of $144.60. That is a 2.7 percent increase.
The Social Security cost of living adjustment, also known as COLA, has granted a 1.3 percent increase in benefits for 2021. Naturally, the Medicare Part B premium is twice the increase granted by COLA. And that means some seniors could feel the pressure once more.
What is COLA?
For starters, some background.
The cost of living adjustment is an adjustment to payouts of Social Security in the United States. It is based on the Consumer Price Index for Urban Wage Earners, which can be a problem because it does not consider the unique fiscal challenges faced by senior citizens. Some groups, like the Senior Citizens League, advocate for basing COLA on more accurate metrics that reflect health care and housing costs.
Theoretically, increases in Medicare premiums would be wrapped up in COLA and would not drastically exceed what Social Security pays out. But as the Senior Citizens League points out, seniors in America have lost over 30 percent of their purchasing power thanks in large part to rising health care costs and an inadequate COLA adjustment.
This is the lowest COLA increase in four years and it will lead many seniors to make significant lifestyle choices, especially as other costs rise as well.
So now, the cycle continues.
What Other Premiums are Increasing?
It isn’t just Medicare Part B premiums that are increasing for 2021, sadly.
The annual deductible for Part B is set to rise to $203 for 2021, up from the $198 amount for 2020. The Part A deductible per hospital benefit will increase to $1,484. That’s a big $76 jump from where it stood in 2020.
On paper, this increase isn’t as significant as last year’s. The Medicare Part B premium jumped some $9.10 a month for 2020, but everything doubles back to Social Security and the COLA allowance. With the coronavirus pandemic shrinking the capability of the economy and the COLA allowance a parsimonious increase at best, the squeeze is on.
For the average recipient of Social Security, the newest COLA adjustment will mean a loss of about $20 a month. Consider Medicare’s increase of $3.90 a month and that allowance shrinks. With the increased deductibles, seniors can watch where the money goes – and it is not comforting.
The pressure is highest for senior citizens who count only on Social Security to get by. Those with other forms of income may better absorb adjustments required for getting by in 2021, but that darn pandemic is tossing a wrench into most plans. That can make budgeting on a fixed income nearly impossible.
That doesn’t even mention Part D premiums, which may also increase depending on the cost of drugs in 2021.
What Does the Future Hold?
You might want to read our article Is Medicare Running Out of Money?
Getting the COVID-19 pandemic under some semblance of control would go a long way to righting the ship in terms of Medicare costs. Things are unstable right now, with little to no movement toward progress. As cases continue to spike, markets adjust and other elements of the economy react.
That all goes back to COLA and Medicare premiums. If the medical establishment must make allowances for higher costs and more volatility, adjustments to the income allowances of seniors would reflect that. Without a clear plan to fight the virus and without the full will of the people behind any vaccine, that state of flux could exist for a long time.
Stability matters, especially when seniors are trying to plan their financial futures. Living on a fixed income is a challenge in the best of circumstances, but when economic realities are less than consistent budgeting is a greater task.
Changing the way COLA is tabulated would go a long way to helping support seniors, but that requires the cooperation of lawmakers. And waiting around for that might be a fool’s errand.