Lincoln Emery isn't panicked yet about the $5 monthly increase in his Medicare Part B premiums this year. After taxes, he's receiving about $38 in cost-of-living adjustments to his Social Security and military pension benefits.
But as the premiums escalate, the 77-year-old Hamptonville, N.C., resident worries that if he is lucky enough live into his 80s or 90s, those annual increases will disappear, and his income of roughly $22,000 will be eroded by inflation.
"I own my home free and clear and only have to take care of myself and my dog, so it isn't hitting me too bad yet," he said.
Still, he's noticed the impact of gasoline costs, and his grocery bills have gone up substantially in the last year. His out-of-pocket costs for prescription medicines have gone up, too.
For many of today's seniors, the Social Security situation is no longer a policy debate. It is as real as the shrinking gap between rising Medicare premiums and the Social Security cost-of-living adjustments that were intended to keep seniors in step with inflation.
Nearly 10 million seniors will see their entire Social Security cost-of-living increase eaten up by Medicare Part B premiums within about five years, a new study by TREA Senior Citizens League shows. The advocacy group wants Congress to approve higher cost-of-living adjustments for seniors receiving Social Security.
Seniors with the lowest incomes will be hit first, because they have the lowest cost-of living adjustments. Women make up a disproportionate share of this group because of historically lower incomes, the Alexandria, Va., group reported.
"Many of our older, more vulnerable citizens are facing the prospect of very real hardship because of their declining spending power, and this study raises serious concerns about their ability to pay for the basic necessities of life," said Shannon Benton, TREA's executive director.
While Social Security cost-of-living adjustments have increased less than 14 percent in the past five years, Medicare Part B premiums have soared 60 percent, said Mary Johnson, the group's Social Security policy analyst, who directed the study.
Eventually, the rising Medicare premiums will catch up to the Social Security increases for many seniors.
For most, the dollar amount of the increase in their Medicare premiums can go no higher than the level of their Social Security adjustments, so they will have to deal with inflation eroding their buying power but not with smaller checks.
Of course, that means the current work force, through Social Security and Medicare programs, will be paying the costs that rise above the caps.
Under the Medicare Modernization Act of 2003, however, means testing begins this year that essentially will take away the cost protection for higher-income people.
Individuals who report more than $80,000 in adjusted gross income ($160,000 for couples) will be required to pay a higher portion of Medicare premiums and lose the protection of having increases capped at inflation.
And Part B late-enrollment penalties aren't protected by the cap on premium increases, a Social Security spokeswoman said. So beneficiaries who are paying that penalty eventually could see smaller Social Security checks, even if their income is below the threshold.
The means testing is causing considerable confusion and worry for many seniors, Johnson said. Medicare means testing for 2007 will use Internal Revenue Service tax records from 2005. So people who realized unusual income in 2005 may be thrown into the higher Medicare premium category, even though their 2007 incomes may be substantially below the threshold, she said.
And for many more who live on smaller incomes, the erosion of the inflation adjustments will hit hard.
A third of Americans receiving Social Security benefits rely on the program for 90 percent or more of their income, the group reported.
Even for more-affluent seniors, the day of reckoning is approaching, Johnson said. Her study shows that most middle-income seniors will start to see their cost-of-living adjustments wiped out by Part B premiums in 12 years.
"This is happening right at the worst time for people, when their overall health-care costs are rising" because of their advancing age, she said.
For now, Emery, the North Carolina retiree, watches Congress on television with considerable disdain, trying to keep up with further potential cuts to what he thought was a "fixed" income.
And he wonders how soon it will be before he's buying his prescriptions a few pills at a time.
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