New Social Security changes are starting to take effect this July following a new law called the “One Big, Beautiful Bill,” which was recently signed by President Donald Trump. The bill is already having an impact on millions of retirees across the country. While some seniors see tax breaks, the bill will also bring major cuts to Medicaid and limits to drug price negotiations under Medicare. Additionally, it could also accelerate the date when Social Security runs out of funds.
Here are the new Social Security changes taking effect this July that retirees should be aware of.
New Tax Breaks for Seniors
The most popular effect of the new law is a new $6,000 tax deduction for seniors aged 65 and older. According to the new law, you can claim the deduction if you earn less than $75,000 as a single individual and $150,000 as a couple. The deduction is reduced for higher incomes and completely disappears for individuals earning above $175,000 (individual) and couples earning above $250,000.
The new rule will exempt 88% of seniors from paying federal taxes on their Social Security benefits up from 64%. However, the deduction only helps middle and upper-middle-income retirees and offers little to low-income seniors who already pay either little or no federal income tax.
Major Medicaid Cuts Could Affect Healthcare
While most seniors gain tax benefits, the bill makes over $1 trillion in cuts in healthcare, especially from Medicaid, which provides healthcare support for many low-income and disabled Americans, including seniors in nursing homes. Although the problem doesn’t change who qualifies for Medicaid, it makes it harder for the program to run.
Due to this cut, seniors and other beneficiaries of Medicaid will have to deal with increased paperwork and will be required to renew their coverage twice as much. This increases the chances of being eliminated from the program.
Hospitals in rural communities are expected to be hit hard by this change because they rely more on Medicaid payments to stay open. While a $50 billion rural health fund has been added to mitigate the effects of the new rule, experts say that it is barely enough to offset the deficit.
Medicare Dug Price Negotiations Weakened
In 2022, Congress allowed Medicare the ability to negotiate lower prices for drugs to make them affordable for seniors. While that is still underway, the new law adds significant exemptions such that certain drugs especially those used to treat rare conditions will be excluded from price negotiations even if they are later approved for broader use. As a result, medications like Ozempic and Wegovy will not sell at lower prices until 2028 or later.
This change will reduce the government’s expected savings from the Medicare negotiation program by close to $5 billion over the next few years and lead to higher healthcare costs for many retirees in the short term.
The Social Security Trust Fund Will Run Out Sooner
In mid-June, the Social Security Trustees released a report stating that the Social Security Trust fund would be depleted by 2033, a year earlier than previous projections. This would lead to a reduction of Social Security benefits by about 23% and Medicare hospital benefits by 11%.
Although the new $6,000 tax break will be helpful for most seniors, it could speed up the exhaustion of the trust fund because it reduces the amount of income taxes flowing into the program. Experts say that the new rule could push Social Security insolvency up by a year.
Access to Social Security Services Is Shrinking
In addition to the effects following the new rule, many seniors are finding it difficult to get help from the Social Security Administration (SSA). The agency has removed key customer service data metrics from its website. These metrics showed crucial data such as call wait times and benefit processing timelines.
Additionally, walk-in visits to SSA local offices are no longer allowed, and one has to schedule an appointment first. This is a move by the SSA to push people to use its online portal. This change may be challenging for seniors who lack computer skills and for people with disabilities that make it difficult to access online services.
Conclusion
As these changes take effect, retirees should stay informed while those aged 65 and older should find out if they qualify for the new tax deduction. Those who rely on Medicaid should ensure they understand the new renewal requirements to avoid being eliminated from the program. They should also monitor changes to prescription drug plans and speak up if they are concerned about the future of Social Security or Medicare.