Staying Fit
After a year of kicking the can down the road, Congress has come back to Washington to deal with expiring tax and spending cuts, as well as action on cuts to Medicare reimbursement rates.
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But some in Washington are also considering cramming changes to Medicare and Social Security into a last-minute budget deal. They’re looking for funds to offset cuts to defense and other federal programs – and benefits for seniors and their kids and grandkids are on the table.
One proposal under consideration would gradually raise the Medicare eligibility age to 67 to bring Medicare in line with Social Security, where full retirement age will be 67 by 2027. Raising the Medicare eligibility age would dramatically increase costs for younger seniors, drive up premiums for those in Medicare and raise health costs for individuals and businesses. And here’s why:
- Removing the youngest and healthiest older Americans from the Medicare risk pool will result in higher premiums for those remaining in the program.
- Forcing 65- and 66-year-olds into the private market shifts significant costs to seniors, driving up their health care costs by $2,200 per year.
- Adding older Americans to private insurance risk pools will drive up everyone’s premiums and employer health care costs.
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Another proposal on the table would change the way the Social Security cost-of-living allowance (COLA) is calculated, reducing benefits by $112 billion in the next 10 years alone. Simply put, that’s money directly out of the pockets of today’s seniors and their kids and grandkids.
The new calculation, called the “chained CPI,” aims to account for ways consumers change their buying habits when prices changes. It assumes that when the cost of something you normally buy goes up, you will substitute a lower-cost item. For example, if the cost of chicken goes up at the grocery store, you will buy beef instead. However, this theory falls short for older adults since many seniors spend a disproportionate share of their money on prescription drugs, utilities and health care costs that keep going up, but that don’t have a lower-cost substitute. So, what would this change mean for you?
- The annual COLA would be, on average, 0.3 percent lower under the proposed formula.
- The proposed formula would compound over time, reducing the benefit by 3 percent after 10 years and 8.5 percent after 30 years.
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