Senior CPI Would Mean Higher Social Security COLAS

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Senior CPI Would Mean Higher Social Security COLAS

Rising prescription drug and health care costs mean seniors are finding it harder to get by on Social Security alone say 96% of those responding to a recent TSCL survey. Social Security Cost-Of-Living Adjustments (COLAs) are not keeping up, in part because they are determined by an economic indicator that does not accurately reflect the true costs to seniors. The Consumer Price Index for Wage Earners and Clerical Workers (CPI-W) determines COLAs, but surveys only the costs of younger workers, who are more likely to have employer-provided health insurance, and to use fewer prescription drugs than seniors do.

For 17 years the government has tracked a senior-only CPI, the Consumer Price Index for Elderly Consumers (CPI-E). The CPI-E, which gives more weight to health care and prescription drug costs, rises more quickly than the CPI-W. For example, seniors would receive a COLA of 3.7% in 2001 instead of 3.5% if the CPI-E were used to determine the COLA.

What Difference Would a More Accurate COLA Make?

A person who retired with an average benefit in 1984 would receive an additional $50.95 per month in 2001, and a total of $5,654.49 more in benefits over 17 years had the CPI-E been used to determine COLAs.

This article first appeared in Volume 6, Issue 3 of "The Social Security and Medicare Advisor" newsletter (February/2001). To receive future editions of "The Advisor" in its special, free e-mail version, please click here.