2017 Social Security, Medicare, Military Benefits & Medicaid COLA
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Recipients of Social Security retirement income, Social Security disability income, veterans’ pensions, Supplemental Security Income (SSI), Medicaid, and other social insurance and public assistance benefits will experience cost-of-living adjustments in January 2017. The benefits and applicable deductions, such as Medicare premiums, will rise together with corresponding increases in Social Security taxes paid by the American workforce.
Cost-of-living adjustments, often abbreviated as “COLAs,” protect government benefits recipients from inflation. Without COLAs, the rising price of groceries, gasoline, health care, and other essential products and services would become less affordable as the price tags of those items increase with inflation.
The Social Security Administration, Veterans Administration, and the Centers for Medicare & Medicaid Services (an agency of the Department of Health and Human Services known as “CMS”) update the values of Social Security benefits, Medicare premiums, and certain Medicaid eligibility criteria at the beginning of some calendar years to offset inflation. The agencies make cost-of-living adjustments according to changes in U.S. Department of Labor Bureau of Labor Statistics’ Consumer Price Index (CPI). The annual CPI evaluation compares the current year third quarter (July, August, and September) to the previous year third quarter to measure whether the price level of a hypothetical market basket of consumer goods and services purchased by households has increased.
The CPI increased from 2015 to 2016 by 0.3%, so Social Security retirement benefits, Social Security disability benefits, and veterans’ pensions will also increase but by 0.3% in 2017. For example, if a retiree receives a 2016 gross Social Security monthly benefit of $1,500, the gross Social Security benefit will increase to $1,545. That does not mean that the recipient will actually receive the entire $45, because the Social Security Administration subtracts the Medicare premium from the gross Social Security benefit before depositing the net benefit in a recipient’s checking account.
When Social Security benefits increase, states (like Indiana, but not Illinois) can provide corresponding COLAs to Medicaid applicants’ spouses. The State of Indiana published in summer 2016 that the monthly average cost of Indiana nursing home care was $6,078, which totals an annual cost of $72,936. Generally, a Hoosier nursing home resident qualifies for Medicaid if the resident’s resource value drops below $2,000.
The Medicare Catastrophic Coverage Act of 1988 (the “MCCA”) offers inflation-adjusted impoverishment protection for nursing home resident’s spouse by qualifying the nursing home resident for Medicaid to pay nursing home bills while allowing the spouse to keep certain assets in addition to the nursing home resident’s allowable assets. The COLAs increase the minimum ($26,180 in 2017) and maximum ($122,900 in 2017) countable resource values that an Indiana Medicaid applicant and applicant’s spouse may keep in addition to other exempt assets that Medicaid permits the spouse to keep (such as a vehicle, residence, IRA, and other real estate).
Jeff R. Hawkins and Jennifer J. Hawkins are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation; a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association.
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