Social Security Benefits Will Increase 2.9% Next Year

The Social Security Administration formally announced Wednesday a 2.9% cost-of-living increase for the 44 million Americans getting monthly benefit checks. The average monthly benefit for retired workers will climb to $745 a month with the Jan. 3 check, up from $724. The maximum benefit for a worker retiring in January will be $1,326 a month, up from $1,248 last January.

Meanwhile, the nation’s 38 million Medicare beneficiaries are likely to face only a modest premium increase of $1.30 a month for the insurance that covers visits to doctors’ offices, sources said Wednesday.

The Part B premium for doctor bills, now $42.50 a month, is scheduled to rise to $43.80 on Jan. 1, according to preliminary calculations made available to The Times. The charge for the first day in the hospital, now $736, would rise to $760 unless the White House budget office orders a change before the new year begins.

For Social Security recipients, the annual increases protect the buying power of their retirement checks. With the automatic raises, which began in 1973, Social Security has lifted millions of elderly persons out of poverty.

The poverty rate is 12% for those over 65. Without Social Security income, that age group would have a poverty rate of 54%.

Benefits rise automatically each January to match the increase in the cost of living, as measured by the government’s consumer price index, during the year ending Sept. 30. The CPI for September, issued on Wednesday, rose 0.3%, reflecting higher costs for food and automobiles.

The 2.9% adjustment also applies to supplemental security income, a welfare program for poor, blind and disabled elderly people. The maximum monthly benefit for an individual will rise to $484 from $470, and the maximum payment for a couple will increase to $726 from $705.

Benefits will rise for the disabled, with the average payment climbing to $704 a month from $684. The maximum payment for a family with a disabled worker, spouse and children, will be $1,169, up from $1,136.

Social Security is financed by payroll taxes, 7.65% each paid by workers and their employers. The maximum wage base on which the tax is paid will climb to $65,400 in 1997, compared with $62,700 this year.

The small increase in the Part B Medicare premium, if it becomes final, would be welcome news for beneficiaries. They would still be paying less than last year when the premium, which is usually deducted from beneficiaries’ Social Security check, was $46.10 a month.

The modest increase in the Part B premium, which rises with the rate of inflation in doctors’ services, will do little to cure Medicare’s financial ills. The Part B premium is calculated to equal one-quarter of the costs of treating the elderly in doctors’ offices.

And Medicare Part A, the hospital trust fund, is still expected to go broke in the year 2001. The hospital trust fund is financed by a payroll tax on both workers and employers of 1.45%.

Administration officials declined to confirm the 1997 Medicare Part B cost numbers on Wednesday, saying they were still under analysis at the Office of Management and Budget.

“It is somewhere in the bowels of OMB getting reviewed,” said Melissa T. Skolfield, assistant secretary for public affairs at the Department of Health and Human Services.

OMB, which began its review at the beginning of this week, ordinarily has up to 90 days to complete its work, although it must act before Jan. 1. OMB typically confirms the numbers prepared by government health experts at HHS.

“In all the years I was there, they never changed it,” said Guy King, who served as chief actuary from 1978 through 1994 at the Health Care Financing Administration, which runs Medicare.