Social Security benefits will increase 2.8 percent in 2019, the largest cost-of-living adjustment (COLA) in seven years.
The COLA, announced Thursday, Oct. 11, will increase the average Social Security retirement benefit by $39 a month or roughly $468 a year. The average single retired Social Security recipient is expected to receive $1,422 in December 2018 before increasing to $1,461 a month later. The COLA affects household budgets for about 1 in 5 Americans, including Social Security beneficiaries, disabled veterans and federal retirees.
AARP Chief Executive Officer Jo Ann Jenkins said, “The 2.8 percent COLA announced today brings needed income security to those Social Security beneficiaries and their families who depend on their earned, modest benefits. The COLA is particularly important for the tens of millions of families who depend on Social Security for all or most of their income, many of whom may have lost ground during the Great Recession. Unfortunately, the cost of living increase may not adequately cover their expenses that rise faster than inflation including health, prescription drug, utility and housing costs.”
On Friday, Oct. 12, the government announced a slight rise in monthly premium costs for Medicare Part B will go up in 2019. This increase could affect actual individual benefits because the premium is deducted from Social Security payments. Part B Medicare covers physician and diagnostic services, outpatient hospital services, certain home health services and durable medical equipment.
Those 65 and older could see their Social Security COLA swallowed up by health care costs, including the Medicare monthly premium increase, said Nancy Altman, president of Social Security Works, a nonprofit advocacy group. The Medicare monthly premium could be announced as early as next week. Medicare open enrollment begins Monday and ends Dec. 7.
Social Security is financed by a tax on workers’ wages. Next year, the maximum amount of earnings subject to the Social Security tax will increase from $128,400 to $132,900.
For answers to Social Security questions, including when to claim, AARP has launched the Social Security Resource Center, a one-stop shop for consumer information.
President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935, 83 years ago today. Here are some key facts about the program:
About 62 million people received Social Security checks in June of this year.
The average monthly check was $1,343.
Social Security lifts about 15 million elderly Americans out of poverty.
Benefits for the average worker are only about half those in other developed countries.
About 1 in 5 seniors rely on Social Security for more than 90 percent of their income.
Administrative costs for the program are just 0.7 percent of annual benefits.
Social Security’s trust funds will be exhausted by 2034. If policymakers do not act by then, payments could be reduced by about 25 percent.
Health Costs Are Projected to Consume Half of Average Per Social Security Income by 2030
Health care costs are a substantial and growing burden for many people on Medicare and are projected to consume a larger share of total income over time, according to a new analysis from the Kaiser Family Foundation.
The study, Medicare Beneficiaries’ Out-of-Pocket Health Care Spending as a Share of Income Now and Projections for the Future, finds that more one-third of people with traditional Medicare spent at least 20 percent of their total income on out-of-pocket health care costs in 2013. That included premiums, deductibles and cost sharing for Medicare-covered services, as well as spending on services not covered by Medicare, such as dental and long-term care. The analysis of spending as a share of total income does not include enrollees in Medicare Advantage plans, who account for 19 million of the 59 million people with Medicare. Income is measured on a per person basis, which for married couples is income for the couple divided in half.
While some people with Medicare face relatively low out-of-pocket costs, the financial burden can be especially large for beneficiaries with modest incomes and significant medical needs. For instance, among beneficiaries in traditional Medicare, just over half with incomes below $20,000 and those ages 85 and over spent at least 20 percent of their total income on health expenditures in 2013, along with more than 4 in 10 beneficiaries in fair or poor health status.
Among all Medicare beneficiaries, out-of-pocket costs consumed 41 percent of beneficiaries’ per person Social Security income in 2013, on average. Older women and beneficiaries ages 85 and older tended to have higher average out-of-pocket spending as a share of average Social Security income than others, according to the analysis.
The analysis projects that the health care spending burden among Medicare beneficiaries will rise over time. By 2030, the study projects that under current policies 42 percent of people with traditional Medicare will spend 20 percent of their total income or more on health care costs. Among all people with Medicare, out-of-pocket costs are projected to consume half of the average per person Social Security benefit by 2030.
With rising health care costs representing a growing challenge to the financial security of older adults, these findings have implications for policies that could shift costs on to beneficiaries as part of a broader effort to reduce federal spending on Medicare, Medicaid or Social Security.
After much secrecy and no public deliberation, Senate Republicans finalized release their “draft” repeal and replace bill for the Affordable Care Act on June 22. Unquestionably, the released “draft” will not be the final version.
Amendments and a potential, albeit not necessary, conference committee are likely to make some adjustments. However, both the House version – American Health Care Act (AHCA) – and the Senate’s Better Care Reconciliation Act (BCRA) will significantly reduce coverage for millions of Americans and reshape insurance for virtually everyone. The Congressional Budget Office (CBO) is expected to provide final numbers early the week of June 26.
If successful, the repeal and replacement of the Affordable Care Act would be in rare company. Even though the U.S. has been slower than any other Western country to develop a safety net, the U.S. has rarely taken back benefits once they have been bestowed on its citizenry. Indeed, only a small number of significant cases come to mind.
My academic work has analyzed the evolution of the American health care system including those rare instances. I believe historical precedents can provide insights for the current debate.
Providing help to mothers and infants
The first major federal grant program for health purposes was also the first one to quickly be eliminated. The program was authorized under the Sheppard-Towner Maternity and Infancy Protection Act of 1921. It provided the equivalent of US$20 million a year in today’s dollars to states in order to pay for the needs of women and young children.
Sheppard-Towner, which provided funding to improve health care services for mothers and infants, was enacted after a long debate in Congress amid accusations of socialism and promiscuity. Interestingly enough, the act may have passed only due to pressure from newly voting-eligible women.
Jeanette Rankin, the original sponsor of the Shepard-Towner Act and the first woman elected to Congress, pictured in 1970.John Duricka/AP
Overall, the program was responsible for more than 3 million home visits, close to 200,000 child health conferences and more than 22 million pieces of health education literature distributed. It also helped to establish 3,000 permanent health clinics serving 700,000 expectant mothers and more than 4 million babies.
The program continued until 1929, when Congress, under pressure from the American Medical Association, the Catholic Church and the Daughters of the American Revolution, terminated the program. Without federal support, a majority of states either eliminated the programs or only provided nominal funding. Fortunately for America’s children and mothers, the Social Security Amendment of 1935 reestablished much of the original funding and expanded it over time.
Helping America’s farmers during the New Deal
America’s next major program confronted a similar fate. To address the challenges of rural America during the Great Depression, the federal government developed a variety of insurance and health care programs that offered extensive and comprehensive services to millions of farm workers, migrants and farmers.
Grandmother and sick baby of a migratory family in Arizona. These types of families were targeted for help by the Farm Security Administration.NARA/ Dorothea Lange
Some of these programs provided subsidies to farmers to form more than 1,200 insurance cooperatives nationwide. At times, the federal government’s Farm Security Administaton (FSA) provided extensive services directly to migrant farm workers through medical assistance on agricultural trains, mobile and roving clinics, migratory labor camps that included health centers staffed with qualified providers, full-service hospitals and Agricultural Workers Health Associations (AWHA).
In all cases, services were generally comprehensive and included ordinary medical care, emergency surgery and hospitalization, maternal and infant care, prescription drugs and dental care.
Although these services were accepted during wartime, the American Medical Association and the Farm Bureau opposed them, which ultimately led to their demise shortly after World War II. Millions of farmers lost their insurance.
Medicaid in the 1980s
Perhaps the most indicative expectations on what will happen in case congressional Republicans are able to pass their proposal hails from the Medicaid program itself.
In the early 1980s, Medicaid underwent a series of cuts and reductions leading to the first contracting in the program’s history. These involved both a reduction in federal funding and in eligibility, and an increase in state flexibility to run the program, as do the Republican proposals in Congress.
The 1980s also saw the creation and quick demise of another health care program. The Medicare Catastrophic Coverage Act of 1988 sought to fill in the gaps of the original Medicare program for America’s seniors. Specifically, it sought to provide them with protection from major medical costs and offer them a prescription drug benefit for the first time.
Similarly to the Affordable Care Act, the law had a redistributive foundation by requiring richer seniors to contribute more than poorer individuals. Also, similarly to the Affordable Care Act, it phased in benefits over a period of time.
Congress, confronted by affluent seniors who would have shouldered much of the financial burden of the program, quickly repealed much of the law before its provisions came into effect.
A Republican President, George W. Bush, was responsible for extending prescription drug benefits to seniors under Medicare Part D.Jason Reed/Reuters
It took more than a decade to provide America’s seniors with a prescription drug benefit through Medicare Part D, while only limited steps have been taken to protect seniors from major medical losses.
The consequences of those rare cases are nonetheless instructive. States were unable to continue the program without federal support or offer a valid replacement. Indeed, the programs quickly faded away. With them, millions of Americans lost access to health care.
In all three previous cases, the federal government eventually renewed its financial support. However, at times it took time for a replacement program to emerge.
The current changes proposed by congressional Republicans, particularly to the Medicaid program, are tremendously more consequential than anything we have previously experienced.
Indeed, in scale and extent, the proposed changes are unprecedented and would significantly roll back, likely for the foreseeable future, America’s safety net.
Rep. Tom Price (R-Ga.), President Donald Trump’s nominee to lead the Department of Health and Human Services, said Tuesday he’d favor reforms to Medicare that would ensure the program’s viability.
“The Medicare trustees … have told all of us that Medicare, in a very short period of time, less than 10 years, is going to be out of the kind of resources that will allow us as a society to keep the promise to beneficiaries,” Price said Tuesday before the Senate Finance Committee. “We will not be able to provide the services to Medicare patients at that time — which is very, very close — if nothing is done.”
Price supports turning Medicare into a premium support system, giving eligible beneficiaries a set amount to buy coverage. GOP leaders such as House Speaker Paul Ryan have also backed this idea in the past.
Trump, on the other hand, vowed during his campaign not to cut Medicare and Social Security, pointing out that this position set him apart from other GOP candidates during the primary. Democrats are now trying to hold him to that promise.
The country’s aging population, which is using more Social Security and requiring more Medicare coverage, is driving most of the spending increases, according to the report. Compared to 50 years ago, the number of people who are 65 years old and older has more than doubled, CBO found. As a result, Medicare outlays will remain at about 3% of GDP until 2018 but then increase on an annual basis through 2026.
“Over the next decade, as members of the baby-boom generation age and as life expectancy continues to increase, that number is expected to rise by more than one-third, boosting the number of beneficiaries of those programs,” the report states, adding, “As a result, projected spending for people age 65 or older in three large programs — Social Security, Medicare, and Medicaid — increases from roughly one-third of all federal noninterest spending in 2016 to about 40% in 2026.”
This chart, produced by the Bipartisan Policy Center based on CBO data from 2011, shows the projected spending on health care, social security, discretionary, and mandatory by the federal government, as a percentage of GDP. As you can see, for all our hyperventilation about social security, it’s relatively stable once we get about 20 years out. Discretionary and other mandatory spending are similarly flat over time. But healthcare… that’s what’s going to get us.
HENRY KOTULA 
