Dissecting the White House’s twist on Social Security and Medicare

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“Social Security checks are going up. Health insurance premiums are falling. This is a big problem for older people.

— President Biden, in a tweetOctober 14

This is a case where there must be a huge asterisk next to a politician’s statement. Social security benefits are increase next year – and health insurance premiums are will fall. “For the first time in more than a decade, seniors’ health insurance premiums will go down even as their Social Security checks go up,” boasted White House press secretary Karine Jean. -Pierre, in a press release.

But the reasons are not so good for seniors.

For months, Biden signaled he was taking aggressive action to tackle inflation, which by one measure rose to 8.2% for the 12 months ending September. This is a stark contrast to the 1-2% inflation rate that was the norm during the previous decade. Prices rose 9.1% in the 12 months to June.

The reason Social Security payments increase is that Social Security benefits, unlike virtually all annuities, are adjusted each year to keep pace with inflation as measured by the home price index. consumption from the Ministry of Labor (IPC-W). Thus, the benefits are always increasing, which makes it very valuable for retirees.

On October 13, the Social Security Administration announced that benefits would increase by 8.7%, for an average increase of more than $140. That sounds like a lot, but in theory, it just allows older people to keep pace with the rising cost of living.

Whether the CPI-W is the appropriate mechanism for such annual adjustments is a matter of debate. The CPI is based on household surveys and measures the increase in costs of a basket of goods purchased by urban consumers. The BLS has toyed with the formula often, sometimes under pressure from lawmakers worried about the federal budget deficit, due to concerns that the measure overstates inflation. In the 1990s, the annual inflation rate as measured by the CPI was reduced by nearly one percentage point as a result of technical adjustments made by the BLS. Without these adjustments, Social Security benefits would be even higher today.

In addition, other inflation indicators, such as the one that measures costs for producers or the one that measures prices for urban and rural consumers, could more accurately reflect changes in the cost of living.

The reality is that if Biden and the Federal Reserve’s efforts to fight inflation were more effective, Social Security benefits would not rise as much.

Medicare Part B is the part of the senior health program that covers physician and outpatient services. Seniors pay a monthly fee. Biden is correct that the bounty will drop next year. Premiums were $170.22 per month in 2022 and will be $164.90 next year. That’s a decrease of about 3 percent.

This seems like good news. But premiums had soared in 2022, rising by $21.60, or 14.5%, one of the largest increases in recent history. Premiums were $148.50 in 2021.

In other words, while premiums decline slightly in 2023, they are still $16.40 higher than in 2021. That’s an 11% increase over two years.

The annual deductible would also drop from $233 in 2022 to $226 in 2023, a decrease of $7. But, again, the annual deductible from the previous year had increased by $30. So overall, deductibles are also 11% higher than two years earlier.

The Centers for Medicare & Medicaid Services said they raised premiums so much in 2022, in part because they had to add reserves to cover a new Alzheimer’s drug given by a doctor at a clinic or a hospital. The drug, known as Aduhelm, was expected to cost $56,000 a year. But Biogen, the manufacturer, cut the price by almost half – to $28,200. This left the program with excess reserves that are now passed on to those covered by Medicare Part B.

But, for the elderly, the modest reductions in the coming year will not compensate for the large increases in the previous year.

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