Inflation: Seniors struggle with a new era of rapidly rising prices

Soaring inflation is troubling for everyone, but when you’re retired, it can be a wallop.

The national average gas price is up by more than 39% from a year ago, while rents jumped a record 15.7% year-over-year in December, according to Zillow. And Medicare prescription drug premiums will increase almost 5% this year, according to the Centers for Medicare and Medicaid Services.

That’s weighing on many seniors, according to a survey by The Senior Citizens League that will be released February 8. Food costs ranked as the fastest growing cost for retired households, followed by housing and medical costs. About 45% of the 1,750 respondents said they had no retirement savings to augment their Social Security income.

Many retirees rely on 401(k)s and IRAs, where there's no programmed tweaking to keep pace with inflation. In addition, people nearing retirement usually shift their savings to bank certificates of deposit and bonds that don't have inflation safeguards.

NEW YORK CITY - JANUARY 12: Prices are displayed outside of a Manhattan business on January 12, 2022 in New York City. Newly released data shows that inflation grew at its fastest 12-month pace in nearly 40 years during the month of December. It showed a 7% jump from a year earlier, as prices rose on everything from gas to furniture for American shoppers. (Photo by Spencer Platt/Getty Images)

The good news: Social Security has a 5.9% cost of living adjustment (COLA) increase that just kicked in; the highest in four decades. The 2022 COLA bumps an average monthly retirement benefit of $1,565 to roughly $1,657.


The bad news: The 14.5% increase in Medicare Part B premiums for 2022 pushes the standard monthly premium from $148.50 in 2021 to $170.10. (Medicare Part B covers doctors' appointments, outpatient hospital services, and some medical services not covered by Medicare Part A.)

And, by some calculations, inflation has been higher than the headline figure of 7%.

“New December CPI data indicates that inflation through December was actually 7.8%, a full 1.9 percentage point more than the COLA,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League.

What does that mean?

“An average retiree benefit increased by $92.80. However, current inflation of 7.8% means one’s benefit would theoretically need to have increased by $122.00 to be keeping up," Johnson said, "a shortfall of about $29.72."

Grounds for a Medicare refund

Meanwhile, “the Social Security Administration will be automatically deducting the largest Medicare Part B premium increase (dollar-wise) in program history which would further reduce the amount of COLA that people have to meet all other significant price increases,” Johnson said.

Medicare beneficiaries may, however, have grounds to ask for a refund on a portion of their 2022 Part B premiums.

“It appears that Medicare is overcharging 57 million older and disabled beneficiaries for their Part B coverage this year,” Johnson added.

Senior customer showing prescription to female doctor. Cashier is assisting elderly woman at checkout counter. They are standing at pharmacy.
(Photo credit: Getty Creative) (Morsa Images via Getty Images)

The issue: Spurring the bump up in the 2022 premium is Aduhelm, the contentious drug approved in June by the U.S. Food and Drug Administration for the treatment of Alzheimer's disease. Medicare usually covers FDA-approved drugs, but this one comes with a stunning price tag set by its maker, Biogen —$56,000 per patient annually. The drug will be covered under Part B, rather than the Part D prescription drug program.

About half of the increase has been attributed to the drug, according to Johnson. “The likelihood that many Medicare patients will be prescribed Aduhelm in 2022 is very low,” she said. “Medicare should lower the Part B premium, perhaps by as much $11.60 per month.”

“All consumers are struggling with high inflation,” she said, “and an extra $11.60 per month might, for example, cover a co-pay on a needed prescription drug actually being taken by a Medicare beneficiary.”

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Kerry is a Senior Reporter and Columnist at Yahoo Money. Follow her on Twitter @kerryhannon

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