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Mary Beth Franklin: Hints About Social Security COLA And Medicare Premiums In 2020
FYI: Buried in the recent Social Security and Medicare Trustees' Report were some hints about next year's projected cost-of-living adjustments for Social Security benefits and likely increases in Medicare premiums for 2020.
"The income tiers, first imposed in 2011, were never indexed for inflation." Wrong. IRMAA was created by the Medical Modernization Act of 2003, which required IRMAAs starting in 2007. This created income tiers, indexed for inflation. It was only with the enactment of the ACA that the tiers were frozen in years 2011-2019. https://www.everycrsreport.com/reports/R40082.html#_Toc5268963
"IRMAA [Part B] surcharges range from $189.60 to $460.80 a month per person." At the first tier (above the base tier), you're paying 35% of the part B costs rather than 25%. That's a 40% surcharge (1.4 x 25% = 35%). The base rate is $135.50; the extra charge, i.e. surcharge, is $54.10, not $189.60. And so on.
Don't confuse charge with surcharge. This is the same type of confusion that's introduced with Medicare Part C (Medicare Advantage). The premiums you pay to the private insurer for Medicare Advantage are in addition to the Part B charges. Like IRMAA income related monthly adjustment amounts, Medicare Advantage premiums are not total charges.
"[Frozen income brackets, not indexed for inflation] will change starting next year, which means more retirees may be subject to the IRMAA surcharges in 2020, the report said." Say what? If the income threshold for IRMAA surcharges goes up (because it is resuming inflation adjustments), then all else being equal, fewer people would be subject to the surcharges. Not more. If IRMAA hits more people, it is in spite of, not because of, resumed inflation adjustments.
SS 2020 COLA projected at 1.2%. Buncha crap. There's nothing I buy that's only 1.2% more expensive than last year. And very often, it's a sneaky price increase: pay the same or a bit more for less product.
It should be apparent from all the errors regarding IRMAA that this writer couldn't tell the difference between a COLA figure and AWI (average wage index).
On p. 8 (pdf p. 16) the SS Trustees' report explains that it presents three alternative scenarios for projections. "The intermediate assumptions reflect the Trustees' best estimates of future experience. ... Any projection of the future is, of course, uncertain. For this reason, the Trustees also present results under low-cost and high-cost alternatives to provide a range of possible future experience."
In short, use the intermediate-cost projections unless you can justify using either of the others. The IN article reported the projected COLA for Dec. 2019 using the high-cost (lowest COLA) assumptions. The more likely intermediate-cost COLA projection is 50% higher. Regardless, these are nothing more than models, with almost half a year to go.
Note that the COLA calculation isn't quite so simple as to take the change in the "usual" measure of CPI, i.e. CPI-U. First because CPI-W is used. Second, it's not one figure that is used but rather three. The CPI-W numbers from July, Aug, and Sept are averaged together and compared Y/Y. https://www.ssa.gov/oact/cola/latestCOLA.html
According to government figures released last Friday (May 10), some components of CPI-U dropped Y/Y, unadjusted. Apparel dropped the most, down 3%. (Given that much mass produced clothing comes from China, we may expect a significant reversal.) https://www.bls.gov/news.release/cpi.htm
I look at some of the things that pass for reporting and wonder "what are they thinking?"
@msf- Perhaps you have an unnecessary word in that question. Maybe it should be" I look at some of the things that pass for reporting and wonder "what are they thinking?"
Comments
"The income tiers, first imposed in 2011, were never indexed for inflation." Wrong.
IRMAA was created by the Medical Modernization Act of 2003, which required IRMAAs starting in 2007. This created income tiers, indexed for inflation. It was only with the enactment of the ACA that the tiers were frozen in years 2011-2019.
https://www.everycrsreport.com/reports/R40082.html#_Toc5268963
"IRMAA [Part B] surcharges range from $189.60 to $460.80 a month per person."
At the first tier (above the base tier), you're paying 35% of the part B costs rather than 25%. That's a 40% surcharge (1.4 x 25% = 35%). The base rate is $135.50; the extra charge, i.e. surcharge, is $54.10, not $189.60. And so on.
Don't confuse charge with surcharge. This is the same type of confusion that's introduced with Medicare Part C (Medicare Advantage). The premiums you pay to the private insurer for Medicare Advantage are in addition to the Part B charges. Like IRMAA income related monthly adjustment amounts, Medicare Advantage premiums are not total charges.
"[Frozen income brackets, not indexed for inflation] will change starting next year, which means more retirees may be subject to the IRMAA surcharges in 2020, the report said."
Say what? If the income threshold for IRMAA surcharges goes up (because it is resuming inflation adjustments), then all else being equal, fewer people would be subject to the surcharges. Not more. If IRMAA hits more people, it is in spite of, not because of, resumed inflation adjustments.
General background:
https://www.kff.org/medicare/issue-brief/medicares-income-related-premiums-under-current-law-and-changes-for-2019/
On p. 8 (pdf p. 16) the SS Trustees' report explains that it presents three alternative scenarios for projections. "The intermediate assumptions reflect the Trustees' best estimates of future experience. ... Any projection of the future is, of course, uncertain. For this reason, the Trustees also present results under low-cost and high-cost alternatives to provide a range of possible future experience."
In short, use the intermediate-cost projections unless you can justify using either of the others. The IN article reported the projected COLA for Dec. 2019 using the high-cost (lowest COLA) assumptions. The more likely intermediate-cost COLA projection is 50% higher. Regardless, these are nothing more than models, with almost half a year to go.
Table V.1C, with historical and future COLAs starts on p. 115 (pdf p. 123).
https://www.ssa.gov/oact/TR/2019/index.html
Note that the COLA calculation isn't quite so simple as to take the change in the "usual" measure of CPI, i.e. CPI-U. First because CPI-W is used. Second, it's not one figure that is used but rather three. The CPI-W numbers from July, Aug, and Sept are averaged together and compared Y/Y.
https://www.ssa.gov/oact/cola/latestCOLA.html
According to government figures released last Friday (May 10), some components of CPI-U dropped Y/Y, unadjusted. Apparel dropped the most, down 3%. (Given that much mass produced clothing comes from China, we may expect a significant reversal.)
https://www.bls.gov/news.release/cpi.htm
Nah. That guy in the White House assures us that China will be paying for all of these tariffs. Pay attention!
I'm delinquent with a thank you for your May 12 overviews.
I guess I'm also getting to the age where I know people on Medicare who ask about this stuff. So some of the absurdity just pops out at me.
@msf- Perhaps you have an unnecessary word in that question. Maybe it should be" I look at some of the things that pass for reporting and wonder "
whatare they thinking?"