A huge increase in Medicare costs are about to hit retirees in 2022.
As a teacher in Illinois I receive a pension from the state’s Teacher Retirement System.
For twenty years before I began teaching I paid into Social Security.
Because of a punitive federal law called the Windfall Elimination Provision (the WEP) my Social Security benefit is reduced by two thirds because of my teacher pension.
My Social Security benefit barely covers Medicare Part B which is deducted from my tiny monthly Social Security check.
Most teachers receive no Social Security and they must pay for Medicare Part B out of pocket.
Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services not covered by Medicare Part A.
Nobody pays for Medicare Part A.
This year the cost of Medicare Part B was $148.50 a month.
A few weeks ago it seemed as if those who collect their full Social Security benefit would see a 5.9% increase as a result of soaring inflation. Yearly increases in Social Security of tied to inflation.
But what was given with one hand is taken away with another.
Medicare has just announced a 14.5% increase in Medicare Part B costs for all of us retirees.
For those of us on a public pension that is fixed and unlike Social Security is untethered to inflation, it reduces a benefit the real value of which has already been reduced by major increases in the cost of goods and services.
Unlike those of us like teachers on a public pension, most retirees receive both Medicare and Social Security.
For those retirees, to calculate the actual increase in their retirement benefit they need to deduct the cost of Medicare Part B from their Social Security COLA increase.
Mark Miller who publishes Retirement Revised on Substack explains it this way:
For example, if you have a $2,500 monthly Social Security benefit, your net COLA for next year is still 5%. But if you have a neighbor with a benefit of $1,500, the COLA shrinks to 4.5%. And the reduction is absolutely brutal for very low-income beneficiaries - someone with a $600 benefit will get only a 2.3%.
Even if you’re lucky enough to get 5% or more, that will only partly offset rising food, rental housing, home ownership, home heating oil and natural gas and prescription drug prices - all are areas of worry next year.
The irony here is that one of the reasons the Medicare Part B increase is so large is that Congress demanded a reduced Part B increase for 2021 as a part of Covid relief.
The increase for 2021 was not forgiven, however.
It is being tacked on to this year’s Part B cost.
As if the pandemic is over.