Social Security benefits set to increase 2.7% in January

For many participants, higher Medicare premium will all but wipe out rise

October 20, 2004|By Richard Rainey | Richard Rainey,LOS ANGELES TIMES

WASHINGTON - More than 47 million elderly and disabled people will receive a 2.7 percent cost-of-living increase - an average of about $25 a month - in their Social Security benefits starting in January, the government announced yesterday.

But for many of those who participate in Part B of Medicare, which covers visits to doctors' offices, almost half of the benefit increase will disappear before they ever see it.

The government announced last week that the Medicare premium, which typically is deducted from Social Security checks, would rise by $11.60 a month next year.

"Far too many Social Security beneficiaries will see [the benefits increase] partially or completely eroded by the Medicare Part B premium increase," said William D. Novelli, chief executive officer of AARP, a senior citizens' lobby.

At the same time, David Certner, AARP's director of federal affairs, said the cost-of-living adjustment "is always welcome news."

"Those 2 percent to 3 percent a year make a huge difference," he said.

Largest since 2001

The Social Security adjustment, which was calculated to equal the increase in the consumer price index from the July-September period in 2003 to the same three months in 2004, will be the largest since benefits rose by 3.5 percent in January 2001.

On the campaign trail yesterday, Sen. John F. Kerry, President Bush's Democratic challenger, used the news to go on the offensive.

"For a typical senior, nearly half of this year's Social Security cost-of-living adjustment is going to be eaten away by the record rise in Medicare premiums," Kerry said at a rally in Wilkes-Barre, Pa.

"That leaves less money for food, medicine and even an occasional gift for a grandchild."

Calling Social Security a "sacred compact between generations," Kerry said Bush would have a "January surprise" for Americans by swiftly pushing to privatize Social Security after his re-election.

The Bush campaign called Kerry's comments "false and baseless attacks."

Leading congressional Democrats in the House and the Senate echoed Kerry`s sentiments. House Minority Leader Nancy Pelosi of San Francisco blamed the recently enacted Republican bill authorizing the Medicare prescription drug benefit for also providing "billions of dollars to the HMOs and the big drug companies" - payments that resulted in the 17 percent increase in the monthly Medicare premium.

Senate Minority Leader Tom Daschle of South Dakota, currently embroiled in a close re-election battle, called for a cap on Medicare premium increases of one-quarter of Social Security's cost-of-living increase.

For America's 47 million Social Security recipients, including nearly 6 million disabled workers, checks will rise from an average of $930 a month to $955.

The latest increase was the largest since benefits rose by 3.5 percent in 2001. A 2.1 percent increase went into effect at the beginning of this year.

Social Security will face a funding shortfall beginning in 2018 as more baby boomers retire, meaning the government's biggest benefit program will be paying out more in benefit checks than it is collecting in payroll taxes from current workers.

While Bush campaigned in 2000 on a program to partially privatize Social Security by giving younger workers the option of diverting some of their payroll taxes into private investment accounts, he has never pushed the proposal in Congress, in large part because of sizable transition costs that some estimate will top $1 trillion.

Difficult to keep up

Under the law, no Social Security beneficiary will get lower benefits than that person is currently getting even if the Social Security cost-of-living adjustment does not cover the entire cost of the Medicare premium increase.

But advocates for the elderly said that protection still means millions of Social Security beneficiaries at the low end of the benefit scale will see no gain at all this year because the COLA increase will be eaten up by the Medicare premium increase.

The 2.7 percent benefit increase will mean that the average retired couple will see their Social Security benefits rise from $1,532 a month currently to $1,574 next year, a gain of $42 per month.

John Rother, policy director at AARP, formerly the American Association of Retired Persons, said retired people were not only getting hit by higher Medicare premiums but also faced the prospect of soaring heating bills this winter.

"That means that many people will have no ability to keep up with inflation," Rother said.

The Los Angeles Times is a Tribune Publishing newspaper. The Associated Press contributed to this article.

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