Putting You First... Always.

 

We’re here to help now

+
 
-

Give me my FREE Annual Rx checkup

When Social Security Increases Don’t Add Up

How Rising Medical Costs and Minuscule COLA Increases for Social Security Are Affecting Americans in 2017

Each year, inflation and costs of medical care increase at exorbitant rates. Social Security attempts to take into consideration these risings costs for Americans. But is it enough?

If you ask most seniors, the answer is a big, fat “no.”

Adjustments made to Social Security and Supplemental Security income, to counter the effects of ongoing inflation, are labeled as a COLA: Cost of Living Adjustments. These adjustments have an impact on those who rely on the benefits given by Social Security, but  many argue that these increases pale in comparison to the rising costs seniors and retirees face.

We know that reading about COLA and how it’s determined may not be the most exhilarating thing. But, it is important to understand how your Social Security benefits are determined so you can best prepare for the year ahead. Let’s take a look at COLA and Social Security today.

Who Calculates COLA?

It might seem very subjective, but the Cost of Living Adjustments are done in a very precise way and have been for many years.

The Department of Social Security relies on an index called the Consumer Price Index for Urban Wage Earners (also known as the CPI-W). This index, which contains information from the Bureau of Labor Statistics in the Department of Labor, tracks the monthly price changes in over 80,000+ consumer items. These consumer items range from gas to clothing to food items to prescription drugs and everything in-between! Of course, these changes are looked at on a national landscape, and the cost of living changes you experience in your hometown may vary.

In the fall of each year, the Bureau of Labor statistics determines the CPI-W for the third quarter. The officials then compare it to last year’s index. If they notice an increase in living costs, Social Security then grants a cost of living hike.

Recipients of Social Security benefits will see any increase in January of the following year. For example, the new COLA changes were announced in the fall of 2016 and will go into effect January 2017.

Are there other factors involved in calculation COLA?

While tracking monthly price changes is a main part of COLA calculations, it isn’t the only one. There are several factors that can influence the calculation of COLA.

  •       Number of individuals receiving benefits
  •       Individuals and their maximum earnings
  •       Age of Individuals partaking in Social Security Benefits
  •       Automatic Cost of Living Adjustments & Inflation

These factors are still in place today. With the rising numbers of retiring Baby Boomers, don’t be surprised to see a Social Security cost of living increase in 2017 and years beyond. But will it be enough?

Many seniors living on a restricted income say it’s not enough.

History of Social Security Increases

Since its creation, the amount of Social Security beneficiaries has increased over time as have benefits. Social Security is currently experiencing its largest increases in the amount of beneficiaries as more and more Baby Boomers enter the system every day.

Did you know the first COLA was set in June 1975?

History of Rising Medical Costs

Like other goods and services, the price of medical coverage has increased over time. This was due to a variety of factors such as inflation, new publicly funded programs (like the creation of government-created medical coverage) and others. While there is a very detailed history of medical costs, it can be boiled down to a few main factors.

Creation of Modern Medicine

While the creation of modern medicine was valuable to many, it did come at a cost. Modern medicine has increased life longevity in the last century. Of course, the longer we live, the longer we will be in need of healthcare.

Did you know that life expectancy went from 47 years to 78 years in the last hundred years?

Modern medicine has also contributed to our increase in the GPD (gross domestic product) as well from 4% to a whopping 15%.

Technology and Medical Costs

Until 1955, the country was at an economic standstill when it experienced a rise in its expenditures mainly due to the rise in medical technology. In Postwar United States, people were experiencing a sufficient increase in life expectancy and reduction in death due to better treatment of diseases and sicknesses.

In addition, the medical technology field was well funded, which helped expedite new medical technology practices like organ transplants. More and more medical schools have popped up across the country over the decades, and a new focus on urging students to pursue careers in the medical field can anecdotally be seen.

The US federal government continues to play a major role by backing new medical technology, practices, and resources. They have also implemented, and sometimes expanded, public health programs like Medicare and Medicaid which brought medical care to more Americans than before.

Medical Costs Today

These days, we continue to see changes and trends come and go in medical costs. For example, in August of 2016, the overall price for medical treatments were increased by 1%. This increase may not sound like much but it’s been the biggest increase in 32 years. Calculate a 1% increase in the cost of the medications you take; while “1%” may sound small, it’s sure still to hit you where it hurts: your wallet!

Rising costs can also be seen in other fields of medical services, as in the same month, hospital services costs were increased by 1.7%. Analysts predict that this can be a growing trend, which will hurt people overall since these monthly increases will add-up in the end. A “small, 1%” increase each year can add up to quite a bit after several “small, 1%” increases!

Factors in Prescription Drug Costs

As the cost of medical treatments continue to increase over time, the sector that sees the most impact is in the field of prescription drug coverage. Because prescription drug costs are often necessary for a patient, many of us ignore – or begrudgingly swallow (pun intended) – the high costs we must pay for pills and medications we need.

In just a two year period beginning in 2013, medication prices went up nearly 20% from 2013 to 2015. These increases can result not only in higher out of pocket costs for a patient, but also avoidance of taking prescribed medications altogether by those who cannot afford then.

Did you know: discount cards can oftentimes b helpful while shopping for drugs. Also, many pharmacies will price match! Check online to see if a nearby pharmacy is willing to match lower costs their competitors offer.

Prescription drug costs rise mainly it is due to several factors such as:

  • “Market Exclusivity” Regulations – Drug manufacturers can charge higher prices for their products by “market exclusivity” regulations. These regulations allow the companies to recoup research and development costs for new breakthrough medications. The companies can do this without any kind of opposition because Medicare and Medicaid aren’t allowed to negotiate the price. Medicare and Medicaid combined provide healthcare for over ⅓ of Americans – but dtug companies rarely face consequences of raising their costs, especially when they doso to medications that are lifesaving.

Recently, two drugs made headlines for exorbitant price increases. EpiPen, a medication which prevents death due to extreme allergic reactions, recently jumped from about $50 per injection to well over $550. Drugs that treat Malaria and Hepatitis C have also been under scrutiny for astronomical increases.

  • Covering Internal Costs – Like all companies, pharmaceutical companies pay a large amount in administrative and marketing costs. Marketing is a big factor as the pharmaceutical industry is amongst the most profitable industries out there. Many people feel Congress should act to limit the amount drug companies can spend on advertising, since it’s the main driver of increasing costs, while others feel this is overregulation of the private market.

Pfizer creators of such drugs like Viagra and Lyrica, announced at the beginning of 2016 they were to increase the price for all its products. Lyrica saw a 9.4% increase in its price from the previous year, while Viagra will see a 12.9% in cost. While many of us are aware of Viagra, other drugs made by the manufacturer benefit from Viagra’s frequent advertisements. The rest of the line of product from Pfizer has experienced similar rate increases – as well as increased profits.

Generic Prescription vs Brand Name Prescription Drugs

Generic prescription drugs are known to be a lower cost alternative to brand name prescription drugs. However, people are skeptic about taking the alternative route to save some money.  Skeptics believe they are getting an inefficient product. However, the FDA claims that’s not the case.

In reality:

  • The FDA requires generic drugs to have the same quality and performance as brand name drugs
  •  Research by the FDA shows that generics work like brand name drugs.
  •  FDA does not allow a 45% difference in the effectiveness of generic drugs.
  •  Cheaper does not mean lower quality as the FDA is actively engaged in making all regulated products – including generic drugs – are to be deemed safe.
  • FDA monitors adverse events reports for generic drugs.

Combating Rising Costs of Medical Care

As the upward trend of medical costs continues, there are methods to combat it’s harsh impact on yourself and your bank account. For many seniors, you can partake in programs like Medicare Part D.

What is Medicare Part D?

Medicare Part D, also known as the prescription drug coverage part of Medicare, is a plan administered by insurance companies to help qualified individuals to curb the financial impact of obtaining prescription drugs. This plan covers not only prescriptions but vaccinations as well.

Many people are unaware that the law actually requires that Medicare beneficiaries enroll in creditable drug coverage. While most seniors do so by enrolling in either a stand-alone Part D drug plan or a Medicare Advantage Plan with Prescription Drug Coverage, some remain covered by their retirement or group plans.

It’s important to remember that Original Medicare – which is Medicare Part A and Part B only – does not provide creditable drug coverage. In fact, Original Medicare doesn’t provide drug coverage at all (Medicare Part B does cover some medications administered by a physician’s, such as chemotherapy)! Many people choose wisely and pair a Part D Prescription Drug plan with a Medicare Supplement plan to provide them with the ultimate flexibility while protecting their financial risk. The combination of a Medicare Supplement, or MediGap plan, with a Part D plan will allow beneficiaries to avoid the penalty for not having drug coverage.

Medicare beneficiaries may be fined for each month they do not have creditable coverage. It’s important to enroll in a Part D plan as soon as you’re qualified to, to prevent the penalty and to save on medication expenses!

Choosing Medicare Supplements

Medicare Supplements are plans that are administered by private insurance companies to cover the gaps of Medicare’s initial coverage. Medicare Part A and Part B have high out of pocket costs that can be avoided ny enrolling in a MediGap plan.

supps-cover-gaps-2017

Original Medicare doesn’t cover all healthcare costs like copayments and certain deductibles, but they are covered oftentimes by MediGap plans. There are many types of Medicare Supplement plans which allow seniors to find the plan that best suits them.

Not having a MediGap plan during a time of an emergency can leave individuals with bills of $10,000, $100,000 or worse. Keep in mind that the sky is the limit when it comes to Medicare; there are no out of pocket maximums under Original Medicare which would put a cap on the amount of spending you could endure. For example, Medicare Part B covers 80% of “doctor costs”…That leaves you on the hook for 20%, whether your full bill is $50 or $50,000!

Without a Medigap plan, beneficiaries can be chagred with paying forextremly expensive services. While you may enroll in a MediGap plan at any time of the year under most circumstances, it’s recommended you check with an agent before enolling.

Did you know My Medicare Partners offers MediGap plans? Contact one of our Licensed Medicare Agents today and get started on your MediGap quote! No hassle, no obligation no-cost to you.

Finding a Solution Right for You

With things like Social Security, cost of increases in the coming year, and the rising costs of medical services and prescriptions, plan for an uncertain future. Do some research and talk to Medicare professionals to understand the impact it can have to your bottom-line. A small bit of time invested could save you and your significant other a large amount of stress and money!

My Medicare Partners Logo
5319 10th Ave N, Greenacres, FL 33463
Social Media
Disclaimer
Your privacy is of utmost importance to us. We will never share your personal information without your permission, and we will never spam you.

Copyright © 2018 My Medicare Partners, Inc. All Rights Reserved.

Pin It on Pinterest

Shares
Share This