Social Security going up; Medicare will eat most of it
WASHINGTON – More than 47 million Americans will get a 2.7 percent increase in their Social Security checks starting in January, meaning an additional $25 per month for the typical retiree. But almost half of that gain will be gobbled up by a record increase in Medicare premiums.
The cost of living adjustment, or COLA, announced Tuesday by the Social Security Administration will be the largest percentage gain since a 3.5 percent increase in 2001. The increase last January was 2.1 percent.
The inflation adjustment is based on the amount prices – as measured by the Consumer Price Index – have risen in the July-September quarter compared with the same period a year ago. Rising energy costs have driven inflation higher this year.
The average Social Security retiree will see his benefit check increase from $930 this year to $955 next year.
However, the average retiree will also realize just over half of that increase because the government announced in September that monthly Medicare premiums for doctor visits will rise by $11.60 a month next year, a record in dollar terms.
Democratic presidential nominee John Kerry, who is trying to make President Bush’s handling of Social Security and health care major issues in the campaign, told a rally in Pennsylvania the 2.7 percent benefit increase represented “more bad news” because of the large increase in the Medicare premium.
Kerry said the situation will be even worse for 2 million retirees receiving the lowest benefit payments, whose entire cost of living adjustment will be wiped out by the Medicare hike.
Under law, the monthly increase in Medicare premiums cannot be higher than an individual’s cost of living adjustment. Retirees whose cost of living increase will be less than $11.60 next year will not be forced to pay the entire Medicare increase.
Several Democrats are pushing legislation that would go further and cap the Medicare premium increase to no more than 25 percent of a retiree’s cost of living increase.
“American seniors rely on their COLA to help them with the rising cost of prescription drugs, food, clothing and shelter,” said one of the sponsors, Rep. Robert Matsui, D-Calif.
Kerry repeated a charge that Bush is planning a surprise second-term effort to privatize Social Security.
“I will not privatize Social Security, I will not cut benefits. I will not raise the retirement age,” Kerry said.
Social Security will face a funding shortfall in coming years as more baby boomers retire and the government’s biggest benefit program begins paying out more than it takes in in payroll taxes.
Federal Reserve Chairman Alan Greenspan has called for baby boomers’ benefits to be trimmed, possibly by reducing the annual COLA increase or raising the retirement age, because he says the government has promised more in retirement benefits than it can afford.