WASHINGTON — Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise.
Trustees who oversee Social Security are projecting there won’t be a cost-of-living adjustment for the next two years. That hasn’t happened since automatic increases were adopted in 1975.
The projection was first reported earlier this year.
By law, Social Security benefits cannot go down. Nevertheless, monthly payments could drop for people in the Medicare prescription-drug program who choose to have premium costs deducted from their Social Security payments. Drug-program premiums are expected to go up slightly.
“I will promise you, they count on that COLA,” said Barbara Kennelly, a former Democratic congresswoman from Connecticut who heads the National Committee to Preserve Social Security and Medicare. “To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal.”
Cost-of-living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.
Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.
About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8 percent increase in January, the largest since 1982.
More than 32 million people are in the Medicare prescription-drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration.
Millions of people with Medicare Part B coverage for doctors’ visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients. There is no such provision for drug premiums.
Kennelly’s group wants Congress to increase Social Security benefits, even though the formula doesn’t call for it.
Critics argue that Social Security recipients shouldn’t get an increase amid deflation. They note that recipients got a big increase in January — after energy prices had started to fall. They also note that Social Security recipients received one-time $250 payments in the spring as part of the government’s economic- stimulus package.
Consumer prices are down from 2008 levels, giving Social Security recipients more purchasing power, even if their benefits stay the same, said Andrew Biggs, a resident scholar at the American Enterprise Institute, a Washington think tank.
“Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt,” Biggs said. “Congress has to be able to tell people they are not getting everything they want.”
