Does everyone get the full Social Security cost-of-living adjustment?

Does everyone get the full Social Security cost-of-living adjustment?

In most years, no. That’s because most seniors are enrolled in Medicare, and premiums for Part B (which covers outpatient care) typically are deducted from Social Security benefits. But this ‌time will be different.

The COLA that will be announced on Thursday is the gross figure, and that is applied to everyone receiving Social Security. But any change in the Part B premium affects the net amount of your increase.

Very often, any dollar increase in the Part B premium reduces a retiree’s ‌COLA. And, in years when the COLA is very small — or the Part B increase is large — the premium can take a significant bite.

But in 2023, the opposite will occur: Seniors can look forward to an increase in the COLA because of the Part B premium. The standard monthly Part B premium will drop by $5.20, to $164.90. (The annual Part B deductible will also ‌decline, by $7‌, to $226.) A lower premium is rare‌; the last time it dropped was in 2012. The decline is the result of the unusual circumstances surrounding Aduhelm, the controversial and very expensive drug for treating Alzheimer’s disease. ‌The ‌Food and Drug Administration approved Aduhelm in June 2021 despite objections from the agency’s own scientific advisory panel.

The drug was initially ‌to cost $56,000 per patient annually — a figure that the drug’s maker, Biogen, later reduced to $28,800.

Since Aduhelm is administered in outpatient settings, the cost would be borne by Part B, not Part D, the prescription drug plan. Medicare officials‌ anticipated Aduhelm costs when ‌they increased the standard ‌Medicare ‌Part B premium for 2022 by 14.5 percent, to $170.10 per month.‌‌ Medicare ultimately decided to sharply limit coverage of Aduhelm ‌but let‌ the large Part B increase stand, citing administrative hurdles to giving enrollees a midyear rebate.‌

“Medicare is reducing premiums for 2023 mainly to account for lower than expected spending on Aduhelm,” said Tricia Neuman, executive director of the Medicare policy program at the Kaiser Family Foundation.

What happens in years where the Part B premium increase is larger than the COLA‌‌?

This can be a problem during times of low inflation‌. During the last decade, there were two years of zero COLAs‌‌ and five other years when the adjustment was less than 2 percent.

Under federal law, the dollar amount of Part B premium increases cannot exceed the dollar amount of the COLA — ‌a “hold harmless” feature that ensures net Social Security benefits do not fall. The math affects people differently, depending on their Social Security benefit amount. In years of low COLAs ‌or high Part B increases‌, people with lower benefit amounts have seen their ‌benefit ‌payments remain flat.

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