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Social Security increase reduced after Medicare premiums increase

Social Security increase less than previously thought after Medicare premiums: The anticipated 3.6 percent increase in Social Security payout next year will only amount to $29 extra per month on average after an increase of Medicare premiums.

By STEPHEN OHLEMACHERAssociated Press / October 19, 2011

Social Security checks wait to be mailed from the US Treasury's Financial Management services facility in Philadelphia, Feb. 11, 2005. Social Security recipients will get a raise in January - their first increase in benefits since 2009. Experts expect the increase will be about 3.5 percent.

Bradley C. Bower/AP/File

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That didn't last long. About 55 million Social Security recipients will get their first increase in benefits next year since 2009 — a 3.6 percent raise. But higher Medicare premiums could erase part of it.

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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.

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.

The Social Security Administration announced the pay increase Wednesday, 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.

Starting in January, 55 million Social Security recipients will get increases averaging $39 a month, or just over $467 for the 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 for the year.

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

Advocates for seniors say the raise is welcome and overdue.

"It may be cold comfort, however, once they 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.

The annual cost-of-living adjustment is tied to an inflation measure released Wednesday. 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 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, high-income families and low-income 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, erasing about a fourth of Social Security COLA for the average recipient.

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