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Social Security Payments to Rise 2.7 Percent

Higher Medicare Premiums Cancel Half of Increase

By Nell Henderson
Washington Post Staff Writer
Wednesday, October 20, 2004; Page A25

Social Security payments to more than 47 million retired and disabled workers will rise 2.7 percent in January to help recipients keep up with inflation, lifting the average monthly benefit by $25, to $955, the government reported yesterday.

But for senior citizens enrolled in Medicare, nearly half that increase will be consumed by rising health insurance premiums. The premiums, which are deducted from Social Security checks, will rise 17.5 percent next year, an average $11.60 per month.

William D. Novelli, chief executive of AARP, calls the adjustments "good and bad news." (Matt Cilley - AP)

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The combined effect of the Social Security and Medicare increases "is good and bad news," said William D. Novelli, chief executive of AARP, the nation's largest advocacy group for retirees.

More than 10 million more recipients of other federal benefits will also get a cost-of-living adjustment in their monthly checks based on changes in the Labor Department's consumer price index over the past year.

Payments will grow by 2.7 percent beginning on Dec. 30 for beneficiaries of Supplemental Security Income, which is paid to low-income people. Recipients of military and Foreign Service annuities and most federal civilian pensions will also get the 2.7 percent increase, beginning in January.

Federal retirees covered by the Civil Service Retirement System will get the full 2.7 percent boost to their pension benefits in January. Workers who retired under the newer Federal Employees Retirement System and who are 62 or older will get a 2 percent increase, officials said.

In the District, Virginia and Maryland, about 321,000 federal civilian retirees and survivors and about 167,000 military retirees will get bigger monthly checks.

The increases are based on changes to the consumer price index for urban wage earners and clerical workers over the year that ended Sept. 30.

Medicare deductibles and premiums are set annually according to different formulas. About 6.8 million low-income Medicare recipients will not feel the premium increase because it will be covered by Medicaid.

The 2.7 percent Social Security benefit increase will be the largest since January 2001, when benefits rose by 3.5 percent because of price increases in 2000, the last year of the recent stock and investment boom. Cost-of-living adjustments fell in subsequent years along with inflation, during the 2001 recession and uneven recovery that followed.

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