orangeleader.com (Orange, Texas)

Government

October 16, 2012

Social Security benefits to go up by 1.7 percent

(Continued)

WASHINGTON —

Some of next year's COLA could be wiped out by higher Medicare premiums, which are deducted from Social Security payments. The Medicare Part B premium, which covers doctor visits, is expected to rise by about $7 per month for 2013, according to government projections.

The premium is currently $99.90 a month for most seniors. Medicare is expected to announce the premium for 2013 in the coming weeks.

"If seniors are getting a low COLA, much of their increase will go to pay off their Medicare Part B premium," said Mary Johnson, a policy analyst at The Senior Citizens League.

By law, the increase in benefits is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a broad measure of consumer prices generated by the Bureau of Labor Statistics. It measures price changes for food, housing, clothing, transportation, energy, medical care, recreation and education.

Over the past year, housing costs have gone up 1.4 percent but home energy costs have dropped by 3.8 percent, according to the CPI-W. Medical costs, which tend to hit seniors harder than younger adults, have increased by 4.4 percent.

Gasoline prices have gone up by 6.8 percent, but much of that increase happened in the past month, so it is not fully reflected in the COLA for Social Security.

To calculate the COLA, the Social Security Administration compares the average price index for July, August and September with the price index for the same three months in the previous year. The price index for September — the final piece of the puzzle — was released Tuesday.

If consumer prices increase from year to year, Social Security recipients automatically get higher payments, starting the following January. If prices drop, the payments stay the same, as they did in 2010 and 2011.

Since 1975, the annual COLA has averaged 4.2 percent. Only five times has it been below 2 percent, including the two times it was zero. Before 1975, it took an act of Congress to increase Social Security payments.

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