By Ryan McCrimmon and Melissa Attias, CQ Roll Call
October 15, 2015 --Social Security beneficiaries won’t receive an annual raise in 2016, the Social Security Administration announced Thursday.
Due to low inflation in recent months held down by low gas prices, there won’t be any cost-of-living adjustment in January for nearly 65 million Americans who receive Social Security and Supplemental Security Income benefits, or for federal Civil Service retirees who receive government pensions.
It marks just the third time in 40 years that benefits haven’t increased—only in 2010 and 2011 did recipients’ monthly payments remain flat from the previous year.
Beneficiaries saw a 1.5 percent bump in 2014 and a 1.7 percent increase in 2015.
Automatic cost-of-living adjustments went into effect in 1975 to ensure the purchasing power of Social Security benefits doesn’t erode with inflation. The adjustment is based on the consumer price index for urban wage earners and clerical workers, known as CPI-W, which is calculated by the Labor Department.
When that consumer price index declines or remains the same, there’s no boost to monthly Social Security benefits.
"As determined by the Bureau of Labor Statistics, there was no increase in the CPI-W from the third quarter of 2014 to the third quarter of 2015," the Social Security Administration said in a news release Thursday. "Therefore, under existing law, there can be no [cost-of-living adjustment] in 2016. "
Many lawmakers consider CPI-W an outdated measure of inflation.
Some in Congress have proposed using an index for elderly consumers, including prices for drugs, housing and health care, as a more accurate reflection of the living costs of seniors. Earlier this month, Tennessee Republican John J. Duncan Jr. introduced a House bill (HR 3074) that would create the special inflation rate for seniors. Under the current system, he said, "By the time seniors see a raise, it is already outdated and based on expenses of young, urban workers."
Advocates for seniors are lobbying for the change. "The CPI-W reflects the purchasing patterns of workers, many of whom are younger and healthier than most Social Security recipients," wrote Nancy LeaMond, executive vice president for AARP, in a letter sent Wednesday to members of Congress. "As a consequence, the CPI-W underestimates how Social Security beneficiaries experience inflation, and how much their benefits should in fact increase to maintain purchasing power."
Some conservative lawmakers have pushed back, worried about the long-term viability of Social Security. They’ve typically backed tighter inflation measures like the so-called chained consumer price index.
The lack of a benefits bump next year will force some belt-tightening among seniors and other retirees.
"For tens of millions of people this has a devastating impact on the long-term adequacy of their benefits," said Ed Cates, president of the Senior Citizens League, an advocacy group for seniors. Cates called it "a loss of income that most beneficiaries simply can’t be expected to bear."
A recent survey by the group found that 87 percent of respondents saw their benefits boosted by less than $29 a month by the 2015 cost-of-living adjustment, yet 90 percent of respondents said their monthly expenditures rose by more than $39 a month over the previous year.
In a statement after the announcement Thursday, the Senior Citizens League urged Congress to pass an "emergency" cost-of-living adjustment, saying the group "feels strongly that a modest one-time payment of $250 would give seniors much-needed relief next year."
Some Medicare Premiums to Spike
Thursday’s announcement is also expected to prompt substantial increases in Medicare Part B premiums for about 30 percent of beneficiaries in 2016, leaving the Obama administration and Congress with another issue to grapple with before the end of the year.
The other 70 percent of enrollees in Part B, which covers doctors’ visits and outpatient services, are protected by a "hold harmless" provision that prevents their Part B premiums from increasing more than their Social Security payments. That means their premiums will stay frozen at the 2015 rate, while premiums for those not covered by the provision would have to rise significantly to make up the difference.
New enrollees, those who do not receive Social Security checks, higher-income beneficiaries, and people with both Medicare and Medicaid are not protected by the hold harmless provision.
The 2015 Medicare trustees report estimated that the premium rate for those beneficiaries would rise from the current $104.90 per month to $159.30 per month in 2016. Final premiums, which could differ from those in the report, are expected to be announced by the Health and Human Services Department later this month.
Democrats in both chambers are pressing for congressional action, with House Minority Leader Nancy Pelosi of California highlighting the issue at an event last week. Ron Wyden of Oregon, the ranking member on the Senate Finance Committee, and Rep. Dina Titus of Nevada introduced bills (S 2148, HR 3696) the same day that would freeze premiums at the 2015 level for those excluded from the hold harmless.
White House spokesman Josh Earnest said Thursday that President Barack Obama was concerned about seniors having to pay the increased premiums in a year with no Social Security cost of living adjustment. "We're aware of this problem," he said, but declined to specify Obama's plans.
Some sort of relief could get wrapped into end-of-the-year budget legislation, particularly with Republicans expected to insist on offsetting the cost of a fix. The price tag could be in the ballpark of $10 billion depending on the selected approach and final premium rates.