Social Security Recipients May Not See A COLA For 2010

Op-Ed

Social Security Recipients May Not See A COLA For 2010

Dear Friends,

One question on the minds of our Social Security beneficiaries during these uncertain and difficult times is whether or not they will receive a Social Security cost-of-living adjustment (COLA) for 2010. Nearly 50 million retired and disabled Americans receive Social Security benefits. This year, the average retiree benefit was $1,153. Recently, the Congressional Budget Office announced that, depending on market conditions, Social Security recipients may not see a COLA for 2010.

Background:
Social Security and Supplemental Security Income (SSI) benefits are adjusted annually to reflect the increase, if any, in the cost of living as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) prepared by the Bureau of Labor Statistics (BLS). The purpose of the annual cost-of-living adjustment (COLA) is to ensure that the purchasing power of Social Security and SSI benefits is not negatively impacted by inflation.

The automatic calculation for whether COLA occurs has been in place since 1975. Since then, beneficiaries have always received a COLA in order to compensate for inflation and to sustain the skyrocketing prices of health care and prescription drugs.

In 2009, due to historic increases in gas prices, Social Security beneficiaries received a 5.8 percent COLA – the largest adjustment since 1982. In addition, those receiving Social Security benefits also received a one-time $250 economic recovery payment in May.

Will there be a Social Security COLA in 2010?:
The Congressional Budget Office (CBO) is projecting that there will be no Social Security COLA for 2010 due to a decline in energy prices from their historically high levels in 2008.

The Social Security COLA is determined by the change in the consumer price index (CPI-W) between the third quarters of this and last calendar year, published in October. In other words, these projections will not be confirmed until October of this year.

What Happens If There is No Social Security COLA?:
If there is no Social Security COLA, Medicare Part B premiums would be affected in two ways:
• For about 75 percent of Part B participants, the hold harmless provision would prevent their Part B premiums from increasing; therefore, the Social Security checks would remain flat.
• For the other 25 percent of beneficiaries, the hold harmless provision would not apply. These beneficiaries would bear the entire beneficiary share of the increase in Part B costs. This means the collective premium increase would be nearly four times greater than if there were no hold harmless provision.

There are three groups of beneficiaries to whom the hold-harmless provision would not apply:
• Low-income beneficiaries whose Part B premiums are paid by the Medicaid program (currently 17 percent to 18 percent of beneficiaries, expected to increase),
• High-income beneficiaries who are subject to income-related Part B premiums (about 5 percent of beneficiaries), and
• New enrollees (about 2 percent of beneficiaries).

The substantial majority of those not held harmless are low-income beneficiaries whose Part B premiums are paid by Medicaid. Unless Congress intervenes, most of the cost of the increase in Part B premiums in 2010, 2011 and 2012 would be paid by the Federal-State Medicaid program, not directly by beneficiaries.

In the absence of a Social Security COLA, unless Part B premiums are increased considerably on those not held harmless, the Supplementary Medical Insurance Trust Fund – which finances Part B – is at risk of collapse.

If there is no COLA, would Congress consider mandating some type of emergency adjustment?
Although the annual Social Security COLA is a small increase, it is a much-needed benefit for our nation's seniors. It is my belief that any change to COLA must be carefully examined, as changes to the COLA calculation would affect millions of seniors and numerous programs. While we will remain unsure if there will be a COLA for 2010 until October of this year, it is clear that the current Social Security system is not keeping up with our seniors' basic needs.

Rest assured that if in fact there is no COLA for 2010, Congress will carefully evaluate its extensive impact on all beneficiaries. As your representative, I will do everything I can to ensure stability in the lives of our seniors and to safeguard Social Security.

As always, my office is here is assist you and your family with any questions or concerns. Please contact us at any time.

Sincerely,
Rodney Alexander

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