DECEMBER 14/21, 1998 VOLUME 6, NUMBER 24/25
At the end of each calendar year, as most people realize, Social Security and other government benefits are adjusted based on increases in the cost of living. This year, Social Security’s automatic cost of living adjustment amounts to 1.3%. Interestingly, that figure is tied with the 1986 increase for the lowest since 1975, when automatic cost of living adjustments were first implemented.
Social Security payments are not the only government benefit affected by the cost of living, of course. A number of other programs adjust benefits or eligibility levels each year. Some of the 1999 figures affecting elderly benefits recipients:
Supplemental Security Income is a welfare program, designed to provide a guaranteed minimum income for the elderly, blind and disabled. The maximum income a single beneficiary may have while still qualifying for SSI will rise January 1st from $494 to $500. Married couples will be eligible for SSI (assuming other eligibility criteria are met) if their total income is less than $751–the 1998 figure for couples was $741.
While every state imposes an asset limitation on Medicaid eligibility, about half (including Arizona’s ALTCS program) add an income eligibility test. In 1999, unmarried ALTCS/Medicaid applicants will qualify only if their income is less than $1,500 (up from $1482). Married couples may have either a combined income of $3,000 or less, or income of $1,500 in the name of the institutionalized spouse. Be careful about applying these rules to other states, however; this is one area where state practices vary widely.
ALTCS/Medicaid applicants must also maintain assets below a set level. Generally speaking, unmarried applicants may not have more than $2,000 in liquid assets. Married couples are permitted to retain more in assets, with the precise figure varying depending on the couple’s assets at the time of first institutionalization. In 1999, the community spouse will be permitted to retain at least $16,392 in liquid assets (up from $16,152 in 1998). Depending on the couple’s circumstances, the community spouse may be permitted to retain as much as $81,960 (an increase from last year’s $80,760).
If an ALTCS/Medicaid applicant makes gifts during the three years prior to applying (or within five years in some situations), he or she will be ineligible for benefits for a period dating from the gift. In 1999, that ineligibility period is calculated by dividing the value of the gift by $2,943.42, but only if the applicant lives in the three central counties of Arizona (Pima, Pinal and Maricopa). For the rest of Arizona, the 1999 figure will be $2,802.28. The rest of the country establishes its own figures, so non-Arizonans should consult a local expert to determine the effective rate. The Arizona figures, incidentally, amount to an increase of approximately 4.25%.
Social Security (and Social Security Disability Insurance) benefits increase each year automatically. The annual cost of living adjustment (the “COLA”) is based on calculated increases in the actual cost of living. In the 1990s, the increase has averaged about 3% per year, after a decade of increases as high as 14.3% (in 1980). This year’s increase will be a very modest 1.3%.
Retirees who continue to receive wages may be penalized by a reduction in their Social Security retirement benefits. Beginning with the new year, retirees under 65 years of age will be permitted to earn up to $9,600 per year without having any effect on their Social Security retirement; for retirees aged 65 to 69, the maximum earnings will be $15,500 per year.
Once a wage earner reaches a certain income level, his or her remaining income is not subjected to Social Security taxes. In 1999, that level will increase to $72,600.
Incidentally, the Social Security Administration estimates that the annual retiree in 1999 will receive about $780 per month. If both husband and wife paid into the system, the Administration estimates that the average couple will receive about $1,310 in benefits.
Most of the annual adjustments in the Medicare program relate to deductible and co-payment amounts. The Medicare Part B deductible will remain $100 per year, and the monthly premium will increase slightly, to $45.50 (from $43.80 in 1997 and 1998).
Part A benefits are more complicated. For those few participants who must pay Part A premiums (the coverage is provided to wage earners who meet minimum requirements of participation in the system), the cost will increase to $309 per month.
Medicare’s Part A coverage does not pay for inpatient care until the deductible limits have been reached for each “benefit period.” In 1999, that deductible limit will increase to $768. While the first sixty days of hospitalization is fully covered, Medicare patients will pay a $192 co-insurance amount for the next thirty days of coverage. After ninety days of total coverage, a Medicare patient will begin to use his or her sixty “lifetime reserve” days, with a co-insurance payment of $384 per day.
Medicare also has a limited long-term care benefit, with full coverage for the first twenty days of qualified placement. For days 21 through 100, beneficiaries will pay $96 per day in 1999. Medicare does not cover long-term care placement after 100 days.
Of course, deductible and co-insurance amounts may be paid by Medicare Supplemental Insurance for beneficiaries who purchase such policies. Medicare HMOs may provide coverage with only a small per-visit charge, and the much-discussed “Medicare+Choice” program may provide even more options for seniors in 1999.