After two years without an inflation adjustment, seniors will get a 3.6 percent
Analysts had been forecasting a COLA north of 3 percent for weeks, and the number isn't that tough to predict. Although angry seniors have been denouncing politicians and bureaucrats for stiffing them during the past two lean years, the fact is that they had nothing to do with it.
By law, the COLA is determined by a formula that averages inflation for the third quarter, as reflected by the Consumer Price Index for
This year, the third quarter CPI-W has been running high as a result of rising energy costs. So the generous 3.6 percent raise -- which will turn up in January payments -- was baked into the inflation data over the past several months.
That's the good news. Now for the bad: Many seniors will see part of the COLA consumed by a higher premium for Medicare Part B (doctor visits and outpatient services), which usually is deducted from
The Part B premium usually rises at a rate greater than general inflation -- a reflection of medical inflation. However, by law, the premiums cannot rise in any given year by a greater amount than the Social Security COLA -- a "hold harmless" provision aimed at preventing
About 75 percent of beneficiaries were exempted in this way from Part B premium increases in 2010 and 2011. Rate hikes were paid only by two groups of seniors: low-income beneficiaries whose premiums are paid by
High-income seniors actually were hit in several ways: not only did they pay higher premiums, but also the rate increases were greater than they would have been absent the "hold harmless" provision. Under the law,
In 2010, the base Part B premium jumped to
The 2012 Part B premium will be announced in early November. Analysts think it will be somewhere around
But what will it mean if you're part of the other 75 percent -- the vast middle group of seniors? That depends on your actual
Let's say you receive the average benefit -- currently
That's still a pretty healthy raise. But the math is less favorable for seniors with below-average benefits. For example, if your monthly benefit is
Part B's impact on
The COLA news also underscores the critical importance of the Super Committee deficit deliberations on possible cuts to future COLAs now underway in
Talk of adopting a chained CPI already is ringing the alarm bells of
A final note: The SSA also announced an adjustment to the maximum amount of earnings subject to the
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Personal Finance - 2012 Social Security COLA is a Whopping 3.6 Percent, But Medicare Will Take A Bite
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