Medicare premium hike undercuts 2.7 percent Social Security COLA

The Social Security and Medicare programs provide retirement income security and make it possible for millions America's seniors to avoid poverty and to obtain health care services when they enter retirement. Each fall, the Administration announces Social Security benefit and Medicare premium changes for the coming year.

To compensate for the effects of inflation, Social Security beneficiaries receive a cost-of-living adjustment each year.

Social Security benefits increase automatically based on the annual rise in the Consumer Price Index.

The purpose of the annual cost of living adjustment is to ensure that a person's monthly Social Security benefit doesn't drop in value over time.

Last week, the Social Security Administration announced that Social Security beneficiaries will receive a 2.7 percent COLA starting in January 2005. According to the Social Security Administration, the average monthly check for individual retirees will rise from $930 to $955, an increase of $25. For the average couple receiving Social Security benefits, the monthly check will go from $1,532 to $1,574, an increase of $42.

Most seniors rely on Medicare for their health care in retirement. About 93 percent of Medicare's beneficiaries are enrolled in Medicare Part B, which covers physician services, outpatient hospital services, certain home services, durable medical equipment, and other items. The premiums for Medicare Part B are automatically deducted from participants' monthly Social Security checks.

In September, the Administration announced that the 2005 monthly premium paid by beneficiaries enrolled in Medicare Part B will be $78.20. This is an increase of $11.60, or 17.4 percent, over the $66.60 premium in 2004. The 17.4 percent increase planned for next year is the largest premium increase ever.

With the Social Security COLA increase set at 2.7 percent, this means that the average retiree with a benefit of $914 will spend 47 percent of his or her COLA on the Part B premium alone.

According to the Congressional Budget Office, 2.1 million beneficiaries will see the entire amount of their COLA absorbed by the increased Medicare premium.

Approximately 42 percent of those who pay Medicare premiums, or 12.6 million beneficiaries, will see 50 percent or more of their COLA go to pay for the increase in Medicare premiums.

Like all Americans, I am very concerned about rapidly rising health care costs and the impact these increases have on Medicare and other insurance premiums. Most seniors depend on the Social Security COLA to help pay for annual increases in food, clothing, housing, and energy costs, so the additional portion of their incomes that must go to pay Medicare premiums is not insignificant. Although difficult budget issues will complicate finding solutions, I am currently reviewing legislation to help retirees pay their Medicare premiums and protect their Social Security COLAs.

I am hopeful that Democrats and Republicans can work together to maintain the retirement security our seniors deserve.

For more information about benefits, visit the Social Security Administration's Web site at www.ssa.gov.

You may also call Social Security toll-free at (800)772-1213. Information about Medicare is available online at www.medicare.gov or by calling toll-free at (800)MEDICARE.