More than 70 million Americans receiving Social Security benefits can expect an inflation adjustment on their monthly checks next year that will be the largest in four decades.
Government inflation figures for August, released Tuesday, indicate an adjustment in the cost of living of Social Security, known as the COLA, of 8.7 percent, according to an estimate by an unbiased group lobbying for seniors. The Social Security Administration will release the final figure on October 13, following the release of September’s inflation data.
The group’s estimate of 8.7 percent, the Senior Citizens League, is lower than the league’s forecast of 9.6 percent last month. The revision reflects the recent slight decline in inflation to 8.3 percent. But if the league’s forecast holds up, the COLA would still be the largest since 1981, when the inflation adjustment was 11.2 percent.
Rising Medicare premiums often take a big bite out of COLAs. The Part B premium (which covers outpatient services such as doctor visits) is usually deducted from Social Security benefits. Large increases in Part B can greatly reduce or even eliminate a COLA. But next year, most experts expect the standard Part B premium to rise very modestly, or even remain stable at the current $170.10 per month.
Medicare officials have indicated that any premium increase would be modest due to the unusual circumstances surrounding Aduhelm, the precious new drug for the treatment of 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 would initially carry an annual price tag of $56,000 per patient — a figure that the drug’s maker, Biogen, later reduced to $28,800.
Because Aduhelm is administered on an outpatient basis, the cost would be borne by Part B, not Part D, the prescription drug plan. Medicare officials took into account the expected Aduhelm costs when the agency announced a 14.5 percent increase in the standard monthly Medicare Part B premium for 2022, to $170.10.
Medicare eventually decided to sharply curtail Aduhelm’s coverage — but leave the big increase in Part B, citing administrative hurdles to a mid-year cut for the tens of millions of Americans on Medicare. That means Part B participants will be overcharged by about $10 per month this year, and Medicare has stated that the premium will be adjusted accordingly for 2023.
“Seniors are so used to part B premium consuming so much of the COLA — I think they’re going to be in for a pleasant surprise this year,” said Mary Johnson, policy analyst for the league.
The 2023 COLA will provide a significant boost to more than 70 million Americans — a group that includes 52.3 million people over the age of 65, along with a broader group made up of beneficiary survivors and those receiving disability benefits and Supplemental Security Income. , the program for very low income people.
The COLA is calculated annually using a formula detailed in federal law. It uses one of the broadest government measures for inflation, known as the Consumer Price Index for Urban Wage Earners and White-collar workers, or CPI-W.
Social Security takes the average of the CPI-W figures in the third quarter of each year and compares it with the figure for the previous year. For example, the COLA for 2023 is calculated by averaging the CPI-W figures for the third quarter of 2022 and comparing it with the same average figures for 2021.