Medical Costs are Eating Into Social Security Benefits
The average man born in 1918 has seen his Social Security benefit, net of medical expenses, rise from $541.84 at the end of 1983 (when he was 65) to $866.80 at the end of 2007 (when he was 89). However, if his net-of-medical-expenses benefit had kept pace with inflation in the prices of non-medical goods over that time period, he would have had $1,080.90 in 2007 after medical expenses. That is, his net-of-medical-spending benefit has declined by almost 20 percent relative to the non-medical good price index. Similarly, the average woman born in 1918 has seen her net-of-medical-expenses benefit decline by almost 27 percent relative to the non-medical goods price index. [Italics added.]
See the full report on Social Security and medical costs here.
This is interesting. You tend to think that seniors are protected from health care costs by Medicare. Apparently they are not.
Welcome to the club. Medical cost inflation outpacing the cost of living have kept real wages flat to down over the past decades.
Most people don’t realize how much of medical expenses the elderly pay out of their own pockets.
A person turning 65 in 1983 had far fewer choices in terms of medical treatments for heart disease, cancer, etc. than that same senior has today at age 89. The senior might be paying more out-of-pocket for medical care; but they are getting more in the way of advanced treatments. That’s an argument David Cutler highlights in his book, Your Money or Your Life. Medical prices have gone up faster than inflation and health care technology has advanced as well — providing a whole near range of treatments to spend money on. That reminds me of an old saying… “Despite the high cost of living, it is still popular!”
Does this mean that the CPI-W used to determine COLA is actually the more stable choice over the long haul than the more general CPI-U? Perhaps rather than switching indices, it would make more sense to peg COLA to CPI-W minus one percentage point or so.
Devon:
Thanks for the quote.
My grandfather had a saying: “It’s not the cost of living that gets people in trouble. It’s the cost of loving.”
And, then, of course, Jack Benny’s response to Cutler’s book Your Money or your Life, “I’m thinking about it, I’m thinking about it!”
Don Levit