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Medicare premiums to rise for some, including many in Maryland

Staff and wire reports
Medicare premiums set to rise for many.

Older Americans got a double dose of bad news Thursday: There will be no cost-of-living increase in Social Security benefits next year, and Medicare bills are set to soar for many.

It's just the third time in 40 years that Social Security payments will remain flat. All three times have come since 2010.

The annual cost-of-living adjustment, or COLA, by law is based on a government measure of inflation that was released Thursday. Low gas prices — a boon to all Americans — are driving down consumer prices. The average price of a gallon of regular gasoline is $2.30, about 90 cents less than it was a year ago, according to AAA.

Regardless of inflation, the lack of a COLA isn't sitting well with many seniors, especially those on fixed incomes.

"The price of food has gone up. [The] price of where you live has gone up, unless you live in a government-assisted place. Where are you going to get the money to live on?" said Susan Bradshaw, who lives in a retirement community in Atlanta.

The absence of a COLA will affect more than 70 million people, over one-fifth of the nation's population. Almost 60 million retirees, disabled workers, spouses and children receive Social Security benefits. The average monthly payment is $1,224.

In Maryland, there are more than 760,000 seniors, with 85 percent receiving Social Security benefits, according to Social Security Administration data. The means about one in seven Marylanders receives the benefits.

The COLA also affects benefits for about 4 million disabled veterans, 2.5 million federal retirees and their survivors, and more than 8 million people who get Supplemental Security Income, the disability program for the poor. Many people who get SSI also receive Social Security.

The lack of a COLA will trigger a spike in Medicare deductibles and premiums, though dozens of advocacy groups are lobbying Congress to prevent that.

Most Social Security recipients have their Medicare Part B premiums for outpatient care deducted directly from their Social Security payments, and the annual cost-of-living increase is usually enough to cover any rise in premiums. When that doesn't happen, a long-standing federal "hold harmless" law protects the majority of beneficiaries from having their Social Security payments reduced.

But that leaves about 30 percent of Medicare beneficiaries on the hook for a premium increase that would otherwise be spread among all. Those who would pay the higher premiums include 2.8 million new beneficiaries, 1.6 million whose premiums aren't deducted from their Social Security payments, and 3.1 million people with higher incomes.

Their individual premiums could jump by about $54 a month, to $159. Those with higher incomes could see bigger increases.

The Medicare premium increase could fall especially hard on Maryland because of its concentrations of those with higher incomes and federal retirees.

"Certainly we have a state where more than a proportional share of the Medicare recipients would be affected," said Kevin Frick, a health economist and vice dean for education in the Johns Hopkins University's Carey Business School. "Among the higher-income types, how much it hurts them is an open empirical question."

Frick said it would cost about $600 more a year for those seniors, and that might mean that small businesses like restaurants suffer in neighborhoods where they are concentrated.

States would feel a budget impact because they pay part of the Medicare premium for about 10 million low-income beneficiaries, including 137,000 Marylanders who are dually eligible for Medicare and Medicaid programs.

Those people will not be required to pay the premium, however, said Chris Garrett, a spokesman for the Maryland Department of Health and Mental Hygiene. The agency estimates that the premium increase, which the state is mandated to pay, will cost the state $48 million more annually, he said.

All Medicare beneficiaries will see their Part B annual deductible for outpatient care jump by $76, to an estimated $223. The deductible is the annual amount patients pay before Medicare kicks in.

Senate Democrats, led by Sen. Ron Wyden of Oregon, have introduced legislation that would freeze Medicare's Part B premium and deductible for 2016, but its prospects are uncertain.

The White House, meanwhile, has said administration officials are exploring options to mitigate the increase in Medicare costs.

"The COLA announcement not only fails to reflect the actual health care and other expenditures of Social Security beneficiaries, but will actually contribute to a large increase in out-of-pocket health care costs for millions of Medicare enrollees," Nancy LeaMond, AARP's executive vice president, said in a letter to lawmakers.

Congress enacted automatic cost-of-living increases for Social Security beneficiaries in 1975, when inflation was high and there was a lot of pressure to regularly raise benefits. Since then, increases have averaged 4 percent a year.

But in the past decade, the COLA has been that big only once.

The cost-of-living adjustment 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 is calculated by comparing consumer prices in July, August and September each year with prices in the same three months from the previous year. If prices go up, benefits go up. If prices drop or stay flat, benefits stay the same.

The CPI-W numbers for September were released Thursday. The numbers show that gasoline prices are down by 30 percent from last year. Airfares have fallen by 5.9 percent and clothing prices are down by 1.3 percent.

But other prices are up. For example, medical care has risen by 2.4 percent, housing costs climbed by 3.2 percent and food prices were 1.6 percent higher.

Advocates say the government's measure of inflation does not accurately reflect price increases in the goods and services that older people use. "The CPI-W reflects the purchasing patterns of workers, many of whom are younger and healthier than most Social Security recipients," LeaMond said in her letter.

Baltimore Sun reporter Meredith Cohn and the Associated Press contributed to this article.

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