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Seniors Welcome First Social Security Raise Since 2009

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Some worry higher Medicare premiums will wipe out benefits

By Chris Levister –

Fifty-five million Social Security recipients will get a raise in January — their first increase in benefits since 2009. It's expected to be about 3.5 percent.

For some, the just-announced increase amounts to an extra meal out, a little more cash for clothes or a new pair of shoes, some added comfort in retirement.

For millions of struggling seniors, it's a crucial boost to the only thing keeping her afloat.

The reaction the cost-of-living adjustment has garnered illuminates the divide between the rich and poor among America's oldest residents. Social Security represents a staggering share of income for lower- and middle class seniors — made evident just this week in a new government report — and for whom any increase can make a world of difference.

For upper-income seniors, it's simply a nice plus.

Recipients will get increases averaging $39 a month, or about $467 a year. In December, more than 8 million people who receive Supplemental Security Income, the disability program for the poor, will get increases averaging $18 a month, or about $216 a year.

In all, 1 in 5 U.S. residents stand to get a raise from the costof- living adjustment, or COLA.

The Social Security Administration announced the pay increase last week offering a measure of comfort to millions of retirees and disabled people, many who have seen their retirement accounts dwindle, home values drop and out-of-pocket medical costs rise in the years since their last raise.

Advocates for seniors say the raise is welcome and overdue.

Nancy Altman, co-chairwoman of the nationwide Strengthen Social Security Campaign, said she is pleased Social Security recipients will get a raise next year. But, she added, the cost of living allowance, known as the COLA, is "still not enough to keep up with health care costs."

"Despite the absence of a Social Security COLA, over the last two years out-of-pocket health care costs rose 14.1 percent for seniors and people with disabilities, effectively reducing the value of Social Security benefits," Altman said.

Congress adopted the measure in the 1970s, and since then it has resulted in annual benefit increases averaging 4.2 percent. But there was no COLA in 2010 or 2011 because inflation was too low. That was small comfort to the millions of retirees and disabled people who have seen retirement accounts dwindle and home values drop during the period of economic weakness, said David Certner, legislative policy director for the AARP.

"People certainly feel like they are falling behind, and these are modest income folks to begin with, so every dollar counts," Certner said. "I think sometimes people forget what seniors' incomes are."

"It may be cold comfort, however, once seniors see just how high next year's Medicare premiums will go," said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.

For some, higher Medicare Part B premiums could wipe out as much as a fourth of their raise from Social Security, according to projections by the trustees who oversee the programs.

Some of the increase in January will be lost to higher Medicare premiums, which are deducted from Social Security payments. Medicare Part B premiums for 2012 are expected to be announced next week, and the trustees who oversee the program are projecting an increase.

The annual cost-of-living adjustment is tied to an inflation measure released last week. The measure, which was adopted in the 1970s, produced no COLA in 2010 or 2011 because inflation was too low. Those were the first two years without a COLA since automatic increases were enacted in 1975.

Monthly Social Security payments average $1,082, or about $13,000 a year.

Medicare is expected to announce 2012 Part B premiums as early as next week. The premiums, which cover doctor visits, are deducted automatically from monthly Social Security payments.

Medicare Part B premiums must be set each year to cover 25 percent of program costs. By law, they have been frozen at 2009 levels for about 75 percent of beneficiaries because there has been no increase in Social Security payments.

That means the entire premium hike has been borne by the remaining 25 percent, which includes new enrollees, highincome families and lowincome beneficiaries who have their premiums paid by Medicaid, the federal-state health care program for the poor.

The 2009 premium levels are $96.40 a month. Most of those who enrolled in the program in 2010 pay $110.50 a month and most of those who enrolled in 2011 pay $115.40.

In May, the Medicare trustees said they expected the Part B premium to be $106.60 a month in 2012, a figure that could change when the actual premium is set. At that rate, about a quarter of Medicare beneficiaries would see their premiums go down. The rest would pay $10.20 more each month.

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