Don't expect a Social Security cost of living adjustment next year

Feel like you're paying more for just about everything? Not according to Uncle Sam. By the government's accounting, inflation has declined in 2015. That is bad news for Social Security beneficiaries expecting a cost of living adjustment and even worse news for some Medicare recipients.

The government issues updates on Social Security and Medicare every July. This year's reports showed both programs were financially stable or in slightly better shape than last year. But while long-term funding issues must still be solved, there are some short-term consequences that could affect beneficiaries in 2016.

Of immediate concern for recipients, the Social Security report noted there will probably not be a cost of living adjustment (COLA) next year. The COLA is supposed to help Social Security beneficiaries keep pace with inflation. The amount of the increase -- or whether there will be one at all -- is based on the government's consumer inflation rate in the three months from July to September. The gauge has fallen in 2015, and projections are it will not increase during the July-September computation period. The official decision on a 2016 COLA will be announced in October.

Senior advocacy groups argue that the government's inflation gauge is not an accurate measure of older adults' expenses because it understates health care costs and overstates spending on items seniors don't use as much.

If there is no cost of living increase, most Medicare recipients will not see their monthly Part B premiums rise from the current $104.90. By law, in years there is no COLA, Part B premiums cannot be raised for most beneficiaries who have their premium deducted from their Social Security benefit. That covers about 70 percent of Medicare recipients.

But here's the shocker in this scenario: The Medicare program is facing higher expenses next year, and those costs will have to be borne by the other 30 percent, who could see an enormous Part B premium increase. The Medicare annual report said "the estimated monthly premium in 2016 for these other beneficiaries is $159.30." These "other" beneficiaries include 1.6 million who pay the premium directly, typically because they are not yet collecting Social Security, and about 3 million who turn 65 in 2016 and become eligible for Medicare. Another 3.1 million who have been designated "upper-income beneficiaries" because they earn more than $85,000 ($170,000 for a married couple) will also face a premium increase. The increases are estimates and could change. The official decision on Part B premiums will not be made until October.

To read the full reports, go to nwsdy.li/ss2015 and nwsdy.li/medi2015.