Vol. 73/No. 21      June 1, 2009

The annual report issued by the boards of trustees of Social Security and Medicare this year—which claims that the two federal programs are running out of money—seeks to lay the basis for deeper cuts in the future. The report says that the entitlements are “not sustainable under current program parameters” and that a “Medicare funding warning” is in effect. The boards urged the federal government to “take action.”

Social Security was won by working people in the mid-1930s in the midst of a massive upsurge in the labor movement. These and other social welfare programs were extended substantially in the 1960s and early ‘70s as a direct result of the mass working-class movement for Black rights. In this context Medicare became available to all those receiving Social Security.

Automatic cost-of-living adjustments in Social Security so that benefits keep up with inflation were won in 1975. In 2009, the estimated average increase was $63 per month or 5.8 percent, bringing average monthly payments to $1,153. The raise in 2008 was only $24. The federal budget, based on the claim that inflation is low, assumes there will be no increase until 2012, and then only a 1.4 percent raise.

According to a study done by the Senior Citizens League, expenses such as housing, food, transportation, communication, and other basic needs have outpaced cost-of-living adjustments by nearly two-fold in the last nine years. Since 2000, average benefits have risen by 31 percent, while typical costs have risen by 58 percent.

Meanwhile, one-quarter of the 45 million people who receive Medicare benefits “will be subject to unusually large premium increases in the next two years,” says the trustees’ report.

The increase will come in premiums for Part B Medicare insurance, which covers doctors’ fees, outpatient hospital care, and other health services. Most recipients pay around $96 per month. Under federal law, premiums for most beneficiaries cannot go up more than the annual cost-of-living increase.

But one-quarter of Part B recipients are not protected by this provision. They face premium increases even though they will not receive a cost-of-living raise—an effective cut in their benefits. The Congressional Budget Office estimates that the Part B premium will rise to $119 next year and to $123 in 2011.

The South Florida Sun-Sentinel reports that average Medicare Part B premiums have risen some 112 percent in the last nine years.

Cost-of-living adjustments are based on the official Consumer Price Index that is calculated by the government. In the wake of the economic recession of the 1970s, Washington adjusted the CPI to “smooth out” price fluctuations by removing food and energy costs from the calculation of “core” inflation.

Further “adjustments” in CPI calculations came under the Clinton administration. Today the official index is a fraction of what it would have been before the revised calculation methods, lowering the standard of living for tens of millions of working people who depend on these payments for survival.  
 
 
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