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Despite Double-Digit Increases in Health Care Costs, Seniors Receive Only 2.4% COLA Social Security recipients continue to experience serious erosion of benefits due to a government index that does not accurately reflect their true cost-of-living. The annual Cost-of-Living Adjustment (COLA) for 2000 is just 2.4% despite continuing double-digit annual increases in spending on prescription drug and other out-of-pocket health care costs. One reason the Social Security COLA is so low is because it's determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In formulating the CPI, government researchers track the changes in a fixed market basket of goods. Because the CPI-W surveys the market basket of younger workers, it does not reflect costs borne by seniors who use more prescription drugs and health care services than younger, working-age individuals. The government does compile a seniors-only CPI, called the Consumer Price Index for Elderly Consumers (CPI-E). The CPI-E gives greater weight to health care costs. Because health care costs are rising more quickly than non-medical items the CPI-E rises more quickly than the CPI-W, and is a more accurate index for seniors. If the government were to index COLAs to the CPI-E, seniors would have received a COLA of 2.6% this year instead of 2.4%.
An on-going study for TSCL finds that over the 16-year period the government has tracked the CPI-E, retirees receiving an average benefit would have gotten $5,480.10 more using the CPI-E (as illustrated in the following chart ). TSCL supports legislation that would create more fair and accurate COLAs by using the CPI-E to determine the annual increase. This article first appeared in Volume 5, Issue 2 of "The Social Security and Medicare Advisor" newsletter (December/January/2000). To receive future editions of "The Advisor" in its special, free e-mail version, please click here. | ||||||||
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