Social Security: COLA increasing but Medicare costs rising too in 2024
Some seniors may see the increase in Social Security wiped out by rising medical costs. (iStock)
Social Security checks are increasing next year thanks to the annual cost of living adjustments (COLA), but many seniors will also face higher medical care costs. Social Security COLA is factored into Medicare premiums, according to the Centers for Medicare and Medicaid Services (CMS).
In January, more than 71 million seniors receiving social security benefits are in line to get a COLA of 3.2%, averaging out to roughly $59 extra each month. However, the standard monthly cost of Medicare Part B, which most seniors and disabled people have to cover certain doctors' services, outpatient care, medical supplies, and preventive services, will increase by $9.80, or 6%, to $174.70, according to CMS. The annual deductible for Medicare Part B beneficiaries will rise by $14 to $240 in 2024. The Medicare Part A inpatient hospital deductible that beneficiaries pay if admitted to the hospital will be $1,632 in 2024, an increase of $32 from $1,600 in 2023.
The increase in Medicare costs comes in below the $179.80 that was forecasted by the The Senior Citizens League (TSCL)in September.
"We are relieved to learn that the Medicare Part B increase in 2024 won't be as high as we initially feared," said Mary Johnson, Social Security and Medicare policy analyst at the nonprofit advocate The Senior Citizens League.
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Social Security COLA not keeping up with inflation
The 3.2% Social Security cost of living adjustment (COLA) is well above the 2.6% average over the past two decades, but Social Security benefits have lost about 36% of buying power since 2000, according to annual research by TSCL. Roughly 80% of retirees think Congress should beef up inflation protection by providing a COLA that more closely reflects inflation experienced by older adults.
"If that were the law today, the COLA in 2024 would be almost a percentage point higher — 4%, versus the 3.2% just announced by the Social Security Administration," says Mary Johnson
Since 1975, the Social Security COLA has been calculated using the CPI, but the index does not survey the costs of retired households over 62. Older and disabled Social Security recipients spend a bigger share of their incomes on housing and medical costs — two spending categories that tend to rise more quickly than overall inflation.
TSCL and other senior advocates have proposed using a "senior" CPI that more accurately accounts for how older Americans spend money to determine the annual COLA and help protect older Americans' income from the impact of inflation.
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Retirees may face over $17,000 in benefit cuts
Higher incomes because of the large COLA increases over the past three years may impact some seniors' eligibility for low-income assistance programs such as SNAP and rental assistance, the TSCL warned. Earlier this year, federal emergency COVID assistance for SNAP (food stamps) and Medicaid also ended.
Americans are also facing the possible reality that the Social Security trust funds could become insolvent by 2033, triggering an annual benefits cut of $17,400 in today's dollars, according to an analysis by the Committee for a Responsible Federal Budget (CRFB).
The CRFB report states that the Old-Age and Survivors Insurance (OASI) trust fund is facing insolvency because fewer workers are paying into the system to support a growing population of retirees. If lawmakers fail to act, there will be an automatic 23% annual benefit cut for all recipients.
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