How the next big stimulus package plays out could have a big impact on Social Security and Medicare … [+]
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Anyone who cares about Social Security and Medicare should be paying attention to the back-and-forth in Congress on the next stimulus package in response to the Covid-19 pandemic. The latest Republican summary of a draft coronavirus bill includes this blanket statement: “The Medicare Part B premium will not increase in 2021.” That’s a new proposal and one of a host of issues in the next big stimulus package that could have a big impact on Social Security and Medicare recipients.
Medicare Part B premiums. The Republicans say they’ll release a draft bill on Monday, but for now, that one sentence in the summary could mean relief from the dreaded annual increase in Medicare premiums for millions of taxpayers. “No one will have an increase! That’s the plain meaning of it,” says Nancy Altman, president of Social Security Works. Some 56 million Americans rely on Medicare, and premiums can run up to nearly $12,000 a year for a high-income couple. The 2020 base premium of $144.60 a month was up 7% from 2019.
Every year in January there’s a cost-of-living adjustment for Social Security and Medicare Part B and Part D premiums. Most people 65 and older participate in both Social Security and Medicare, and get their Medicare premiums deducted from their monthly Social Security benefits check. Congress doesn’t want that net amount to go up in January, and that’s what this “no premium increase” provision could prevent.
It’s likely that Part B premiums for about 70% of Americans who rely on Medicare will not increase for 2021, based on current law. That’s because of automatic provisions where about 70% of Medicare beneficiaries will be held harmless because people are now expecting no COLA increase in Social Security. But medical costs are going up faster than inflation and part of that cost increase would be borne by the other 30% of Medicare recipients. The language in the Senate summary would mean that these 30% wouldn’t shoulder the increase. They are a mix of high-income folks, those who are on Medicare but not yet claiming Social Security and people who aren’t covered by Social Security (including 25% of state and local employees).
TRUST Act. The Senate summary says that the TRUST Act, which creates bipartisan committees for examining the health of the Social Security, Medicare and Highway Trust Funds, will be included in the stimulus package. “That could directly lead to Social Security cuts,” says Altman. Ways and Means Committee Chairman Richard E. Neal (D-Mass.) warned in a press release yesterday that a similar closed-door commission in 2010 hurt Social Security and Medicare recipients by making cuts to cost-of-living adjustments; hiking the retirement age; changing the Social Security benefit formula to reduce the amount people receive each month; and increasing Medicare cost-sharing.
Here are other hot issues to watch out for in the relief package that will affect seniors but aren’t mentioned in the Senate summary.
Covid Social Security fix for Baby Boomers. The Senate summary doesn’t include a fix to the Covid Social Security “notch” affecting those born in 1960. Those folks turning 60 this year and their families will receive substantially lower Social Security benefits than those with identical earnings who turned 60 last year. Unless Congress acts, the Covid-19 recession will cost them about 9% of their projected Social Security benefits. The reason: a quirk in the Social Security benefit formula affected by the drastic decline in wages during the pandemic. “The irony is that somehow the Republicans are doing a fix for Medicare, but not for Social Security,” Altman says.
Special enrollment period for Medicare. The annual open enrollment period for Medicare is January 1 to March 31, with coverage starting July 31. Medicare advocates are pushing to allow for a special enrollment period for people to access Medicare if they missed the open enrollment period. This would save people who were unable to sign up during the pandemic from lifelong late enrollment penalties.
Payroll tax cut. The White House has now backed down on insisting on including a payroll tax cut in the stimulus, after President Donald Trump initially threatened to veto a bill that doesn’t include it. A payroll tax cut would mean more money in most workers’ pockets, but it would be a blow to Social Security’s dedicated revenue stream.