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Offbeat Seniors suffer as Medicare premiums outpace Social Security hikes

19:22  05 june  2018
19:22  05 june  2018 Source:   fool.com

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Low inflation is holding down Social Security benefits, yet many seniors are facing 50% Medicare premium hikes . Why Medicare Premiums Are Rising and Social Security Benefits Aren't.

Related: Millions Face a 50 % Medicare Premium Hike If Obama and Congress Don’t Act. Medicare Part B and the Social Security trust fund are intertwined, and most seniors on Medicare have their monthly premiums deducted from their Social Security checks.

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Millions of seniors rely on Medicare to cover their healthcare needs. And while Medicare Part A, which covers hospital visits, is generally free to seniors, Part B, which covers doctor visits and diagnostics, comes at a premium that enrollees must pay.

And make no mistake about it: Those premiums have been going nowhere but up, and they are expected to continue to do so in the coming years. Last year, Medicare trustees forecast that Part B premiums would increase about 5% on an annual basis over the next 10 years. The Centers for Medicare Medicaid Services, meanwhile, recently estimated that spending would increase 7.4% per year, on average, over the next decade.

Why do so many people claim Social Security at 62?

  Why do so many people claim Social Security at 62? There are several reasons seniors take benefits so early. Here are a few common ones.Though your Social Security benefits themselves are calculated based on your earnings history (specifically, your top 35 working years), the age at which you file for those benefits could cause your monthly payments to change. To collect your full monthly benefit, you'll need to wait until full retirement age (FRA) to file for Social Security, and that age is not 62. For today's workers, it's either 66, 67, or 66 and a certain number of months. Therefore, if you file at 62, you'll reduce your benefits by a hefty percentage, the specifics of which will depend on your exact FRA.

“If we do nothing, millions of American seniors will suffer . Medicare Part B and the Social Security trust fund are intertwined, and most seniors on Medicare have their monthly premiums deducted from their Social Security checks.

Congress didn’t prevent disparate Medicare premium hikes in 2010 and 2011 when there was also no Social Security benefits increase, although in those years seniors who weren’t held harmless saw their premiums go up by a lot less than 52%---- 15% in 2010 and 4.4% in 2011.

But Social Security's cost-of-living adjustments, or COLAs, are only expected to increase 2.4% on average during that time. This means that Medicare premium increases will outpace COLAs significantly, leaving seniors in a pretty bad spot.

Thankfully, all is not lost. Thanks to Social Security's "hold harmless" provision, recipients cannot face a drop in benefits due to an increase in Medicare premiums. In other words, if the cost of Medicare Part B rises 5% in a given year, and Social Security's COLA is only 2.4%, Part B premiums would max out at 2.4% as well for those already receiving benefits, thereby letting them off the hook for the remaining 2.6%. But while the "hold harmless" clause offers some degree of protection for seniors, it's by no means a perfect solution to the problem at hand.

Trustees warn Medicare finances are worsening

  Trustees warn Medicare finances are worsening Medicare's financial problems have gotten worse, and Social Security's can't be ignored forever, the government said Tuesday in an annual assessment that amounts to a sobering checkup on programs vital to the middle class. The report from program trustees says Medicare will become insolvent in 2026 — three years earlier than previously forecast. Its giant trust fund for inpatient care won't be able to cover projected medical bills starting at that point.The report says Social Security will become insolvent in 2034 — no change from the projection last year.

An unusual confluence of flat Social Security benefits and rising healthcare costs could turn up the pocketbook pressure on some seniors next year, writes contributor Mark Miller.

Most seniors have their monthly Medicare part B premiums deducted directly from their Social Security benefits. But if someone's Social Security benefit increased by just per month, their monthly Medicare premium hike for 2018 could not exceed .

Seniors need those COLAs

The purpose of Social Security COLAs is to enable seniors to retain their buying power in the face of inflation. Unfortunately, those COLAs have done a poor job in recent years of allowing retirees to keep up with their expenses, and healthcare is no exception. Furthermore, because Medicare premiums have been increasing at such a rapid rate, they've been virtually wiping out the COLAs so many seniors have been looking forward to.

Case in point: In 2018, Social Security recipients saw a 2% COLA, the largest in six years. But because Medicare Part B premiums increased simultaneously, the bulk of seniors saw no additional income out of Social Security.

The problem, however, is that most seniors need that extra money in hand to cover their expenses, even if we're talking about a mere $25 or so more per month. The fact that Medicare eats up those COLAs from the get-go leaves seniors at an ongoing disadvantage.

Social Security Expected to Dip Into Its Reserves This Year

  Social Security Expected to Dip Into Its Reserves This Year Social Security’s cost will exceed its income this year for the first time since 1982, forcing the program to dip into its nearly $3 trillion trust fund to cover benefits. This is three years sooner than expected a year ago, partly due to lower economic growth projections, according to the latest annual report the trustees of Social Security and Medicare released Tuesday. The program’s income comes from tax revenue and interest from its trust fund.

Clients who have filed and suspended their Social Security benefits can avoid next year's Medicare premium hike by collecting Social Security no later than November 2015 (with benefits paid in December) and having their Medicare premiums deducted from those benefits.

Insurance premiums accounted for about two-thirds of that total, according to the study, published this month by the Center for Retirement Research at Boston College. However, medical costs for Medicare beneficiaries are expected to outpace the increase in Social Security benefits after 2018

Not everyone is protected from Medicare increases

While the "hold harmless" provision is indeed a double-edged sword, it doesn't fully solve the problem of protecting seniors from Medicare premium hikes. That's because seniors who are new to Medicare and aren't yet collecting Social Security are not eligible for that provision -- or, rather, it simply doesn't apply to them because there are no benefits to protect. And let's be clear: Filing for Social Security at the same time as Medicare isn't the answer here, as that would mean taking benefits ahead of full retirement age and slashing them substantially as a result.

What is the answer? It could lie in a much bigger COLA, but that's not something seniors should count on going into 2019. Still, we can all cross our fingers and hope that lawmakers enact a solution to a persistent problem that doesn't seem to be going away. Otherwise, an untold number of seniors will continue to struggle financially for many years to come.

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Analysts: Medicare Insolvency Looms, But Social Security Poses Bigger Threat .
Experts agree this year’s Social Security and Medicare trustees’ reports were bad news. But the more urgent problem might not have gotten the biggest headlines.The annual report released last week says the Hospital Insurance Trust Fund, which provides the financing behind Medicare payments, will fall into the red in 2026 – three years earlier than a similar report last year projected. The Social Security trust fund, meanwhile, won't run out until 2034 under current law.

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