It has been well documented at this point that retirees are about to receive the largest increase to their Social Security benefits in about four decades. That's because inflation has been sky high this year and Social Security calculates an annual cost-of-living-adjustment (COLA).
While the COLA increase is certainly a big deal, many retirees who claim Social Security are also enrolled in Medicare, the federal health insurance program for those that are 65 and older. Medicare enrollees are also expected to see some nice adjustments made for next year.
In fact, retirees enrolled in both Social Security and Medicare are about to experience a once-in-a-lifetime event. Let me explain.
A one-two punch
Although we are still waiting on September inflation data to make things final, most policy experts are expecting the COLA to come in around 8.7%. It might bounce around a little bit, but expect it to be over 8%. That's following a 5.9% COLA increase this year. That's two years in a row of COLA increases to keep up with the high cost of living.
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In another positive development for retirees, Medicare Part B premiums are also projected to decrease next year. There are several different parts of Medicare. Part A helps cover certain senior care at hospitals, hospices, or nursing homes. Then there is Medicare Part B, which covers a lot of services from doctors or healthcare providers such as home healthcare, outpatient care, medical equipment, and preventative services like vaccines.
Recently, the Centers for Medicare and Medicaid Services (CMS) announced that Medicare Part B premiums will decline by 3% in 2023, the first time they have dropped in a decade. Of course, the decline is coming after Medicare Part B premiums rose close to 15% this year, but nonetheless, it's rare to see premiums decline.
CMS said in a statement that standard monthly Part B premiums will drop from $170.10 to $164.90 in 2023. Additionally, the annual deductible for Medicare Part B enrollees will also fall from $233 to $226.
Retirees who claim both Social Security and Medicare will usually see their Part B premiums taken out of their Social Security checks, so this is another factor that will contribute to higher Social Security benefits next year.
This may not happen again
According to Mary Johnson, a policy analyst for The Senior Citizens League, the higher COLA combined with the lower Medicare Part B premiums next year is "something we may never see again in the rest of our lives."
Johnson added, "That can really be used to pay off credit cards, to restock pantries that have gotten low because people can't afford to buy as much today as they did a year ago and do some long-postponed repairs to homes and cars."
Johnson could very well be right, and if inflation eventually comes down and new changes to Medicare can make further progress in controlling costs, then these changes could make a difference in seniors' lives for years to come.
Obviously, Social Security benefits have lost a lot of their purchasing power in recent decades, while Medicare Part B premiums have risen a lot, but these latest changes are certainly a step in the right direction.
