Social Security Announces 2.1 Percent Benefit Increase for 2004

By Bill Hunot 

Monthly Social Security and Supplemental Security Income benefits for more than 51 million Americans will increase 2.1 percent in 2004, the Social Security Administration announced today.

At the same time, the monthly premium paid by beneficiaries enrolled in Medicare Part B, which covers physician services, outpatient hospital services, certain home health services, durable medical equipment and other items, will be $66.60, an increase of 13.5 percent, or $7.90 over the $58.70 premium for 2003. The Part B premium is required to be the amount needed to cover 25 percent of estimated program costs for enrollees aged 65 and older.

Social Security and Supplemental Security Income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the prior year to the corresponding period of the current year.  This year's increase in the CPI-W was 2.1 percent.

The 2.1 percent Cost-of-Living Adjustment (COLA) will begin with benefits that 47 million Social Security beneficiaries receive in January 2004.  Increased payments to 7 million Supplemental Security Income beneficiaries will begin on December 31.

Some other changes that take effect in January of each year are based on the increase in average wages.  Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $87,900 from $87,000 in 2003.  Of the estimated 156 million workers who will pay Social Security taxes in 2004, about 9.2 million will pay higher taxes as a result of the increase in the taxable maximum in 2004.  

Medicare deductibles are also updated annually in accordance with formulas set by law. For Medicare Part A, which pays for inpatient hospital, skilled nursing facility, and some home health care, the deductible paid by the beneficiary will be $876 in 2004, an increase of $36 from this year's $840 deductible.

The Part A deductible is the beneficiary's only cost for up to 60 days of Medicare-covered inpatient hospital care. However, for extended Medicare-covered hospital stays, beneficiaries must pay an additional $219 per day for days 61 through 90 in 2004, and $438 per day for hospital stays beyond the 90th day in a benefit period. For 2003, per day payment for days 61 through 90 was $210, and $420 for beyond 90 days.