When Medicare premiums rise more than Social Security payments, millions of people living on fixed incomes do not get raises.
On the other hand, most do not get pay cuts, either, because a hold-harmless provision prevents higher Part B premiums from reducing Social Security payments for most people.
David Certner of AARP estimates that as many as three-fourths of beneficiaries will have their entire Social Security increase swallowed by rising Medicare premiums next year.
It is a tough development for retirees who lost much of their savings when the stock market collapsed, who lost value in their homes when the housing market crashed, and who cannot find work.
Medicare premiums are absorbing a growing share of Social Security benefits, leaving retired and disabled people with less money for other expenses, according to a report by the Congressional Research Service.
Social Security recipients spend, on average, 9 percent of their benefits on Medicare Part B premiums, plus 3 percent on premiums for the Medicare prescription drug program.
By 2078, people just retiring would spend nearly one-third of their benefits on premiums for both Medicare programs, the report said. Also, when premiums for the prescription drug program increase, as they do almost every year, they can result in a payment cut for Social Security recipients.
“We could very well be entering a period where we’re all stuck with flat benefits because of the growth in health care costs,’’ said Mary Johnson, a policy analyst at the Senior Citizens League.
By law, Social Security cost-of-living adjustments are determined each year by a government measure of inflation. When consumer prices go up, payments go up. When consumer prices fall, payments stay flat.
There had been a cost-of-living increase every year from 1975 through 2009, when a spike in energy prices resulted in a 5.8 percent increase, the largest in 27 years. Since then, the recession has depressed consumer prices, resulting in no cost-of-living adjustment in 2010 or 2011.
