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Tiny Social Security Increase Could Spike Medicare Costs for State

A 0.3 percent rise in Social Security is lower than the likely rise in Medicare premiums. While most seniors cannot see a rise in Medicare higher than their Social Security increase, 30 percent of recipients will see their Medicare premiums rise as much as 22 percent. The state may need to put up an additional $77 million to cover the Medicare increase for “dual eligibles” -- seniors poor enough to qualify for Medicaid, which picks up the cost of their Medicare premium.
October 20, 2016

A measly increase in Social Security benefits could trigger a spike in Medicare Part B premiums that will hurt both senior citizens and the state’s budget if Congress doesn’t step in to fix it.

The Social Security Administration announced that cost-of-living adjustments for 2017 will only rise 0.3 percent -- or about $5 on average to $1,360 a month.

Medicare premiums will likely rise much more than $5 a month. About 70 percent of seniors will be held harmless and their premiums will not be raised higher than their Social Security increase.

But the other 30 percent, including new beneficiaries, wealthier seniors and those supported by state Medicaid programs will have to make up the difference in what the other seniors aren’t paying so that Medicare can balance its budget.

Sen. Ron Wyden, D-Oregon, said that a last minute deal in 2015 avoided a similar spike in Medicare premiums, and that deal would have prevented a spike if Social Security costs had been kept flat for a second straight year.

But because the increase was tiny -- about $5 a month on average -- but not $0 -- the provision is void and 30 percent of Medicare recipients could see their premiums rise 22 percent, up to $149 a month, according to USA Today, citing a Medicare Trustees report. Part B deductibles are also expected to rise from $166 to $204.

“Seniors in Medicare expect their health costs to be affordable and stable, and I’ll be looking at every option in the days ahead to make sure that remains the case,” Wyden said in a press release.

Seniors who are eligible for both Medicare and Medicaid are unable to afford to pay a premium to Medicare, so the Oregon Health Authority picks up their premium.

A spokeswoman for the Oregon Health Authority did not respond by press time, but earlier this year the state had to find an additional $7.2 million to cover last year's Medicare premium increase for these seniors. The 2015-2017 state budget included $351 million to cover Medicare Part B premiums -- a 22 percent increase would cost an additional $77 million.

The state has also proposed moving these seniors into the coordinated care organizations with the new Medicaid waivers. Currently, they are allowed to opt-in to the CCOs, but changes may shift them to opt-out if they prefer to be in the traditional Medicare program as opposed to the managed care system offered by the CCOs.

Social Security payments are revised each year according to a dubious inflation formula that does not consider spiking housing costs and many of the rising expenses that seniors actually face, while including falling prices for consumer electronics and gasoline that they buy less than younger people.

U.S. Rep. Peter DeFazio, D-Springfield, has introduced legislation to more accurately recalculate Social Security benefits, but the bill is opposed by Republicans and would likely need a Democratic Congress to pass.

“After last year’s zero COLA, this year’s announcement doesn’t offer much help to the millions of families who depend on their Social Security benefits,” AARP CEO Jo Ann Jenkins said in a statement. “As prescription prices skyrocket and Medicare premiums and other health costs increase, many older Americans have understandable concerns. Along with many groups, AARP has also asked Congress to ensure that Medicare premiums and deductibles don't skyrocket next year.”

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