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The senior double-whammy

Seniors took a double-hit recently with the news that there will be no cost-of-living adjustment in their Social Security checks next year while nearly a third of Medicare beneficiaries are likely to face significantly higher premiums. It's only the third time since 1975 that Social Security hasn't increased benefits automatically, with all three instances taking place since 2010.

The culprit is the consumer price index, or CPI, which didn't rise this year chiefly because gasoline prices have fallen significantly. That some Medicare beneficiaries will simultaneously take it on the proverbial chin — premiums may rise as much as 50 percent in some cases — is due to a peculiarity in federal law.

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When Social Security has no COLA, most beneficiaries don't have to pay a higher Medicare Part B premium. That's great for those 70 percent of Medicare users who are existing Social Security beneficiaries and eligible for that exemption in 2016, but it means the remaining 30 percent of Medicare recipients will have to bear the full burden of higher medical costs. That's a group that includes quite a few residents of Maryland, as certain federal retirees who don't receive Social Security benefits (an estimated 1.5 million people nationwide) are among those left footing the bill — a premium expected to rise for many from just under $105 per month for most Medicare recipients to $159 a month.

Higher income households are expected to be socked even harder — premiums will rise to more than $500 per month for those who earn more than $214,000. That's a big hit, not only for seniors but potentially for state governments that may pay billions more to assist low-income seniors who are exempted from the Medicare cost increase. Both the White House and Congress are reportedly looking into potential fixes, perhaps even drawing billions from Medicare's reserves to soften the blow (a move unlikely to make actuaries happy). Given that House Republicans still haven't selected their next speaker and Congress remains a gridlocked mess, it's difficult to believe lawmakers will craft a solution that doesn't somehow kick the proverbial can down the road.

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But whatever the patch, the spike in Medicare premiums suggests at the very least that the way Social Security benefits are calculated needs to be permanently adjusted. The CPI is based on the broad behavior of U.S. consumers, but the elderly are different — they surely benefit less from lower gasoline prices than those who drive daily to work. They are unlikely to purchase durable goods like a new living room couch or flat-screen television that might be falling in price, but they are hit harder by rising health care costs than younger adults. Last year, the COLA was a mere 1.7 percent.

Creating a new cost-of-living measure just for seniors that better reflects their life circumstances wouldn't fully solve rising Medicare costs, but it would help by spreading those costs around. And just as importantly, it would help seniors living primarily (if not exclusively in some cases) off Social Security — their lack of retirement savings being another problem that Congress needs to tackle at the earliest opportunity.

But if Washington is truly ambitious, officials might want to take on the broader issue of solvency in the Social Security, Medicare and Medicaid programs, all of which require attention. Presidential candidates are likely to take the usual all-or-nothing positions with Democrats wanting to collect more in payroll taxes from high-earners and Republicans talking about raising the retirement age or otherwise reducing benefits in some manner. Whatever choices are made, they only get more painful the longer it takes to adopt them.

Altogether, the lack of a cost-of-living adjustment in government benefits will affect 65 million Americans including the disabled, veterans and children, as well as those Social Security retirees. That's roughly one out of four U.S. households. Helping them deal with this income "freeze" should not be regarded as handing out more "free stuff," as some critics might suggest, but honoring a system that working Americans have paid into — and from which they should not be shortchanged.

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