This month, Medicare Part B premiums jumped 13% while Social Security benefits increased just 4.1%.  Seniors would receive a higher, more adequate COLA if the government were to use a seniors’ CPI to calculate the increase.  How much higher?  A new analysis for TSCL has found that, had the government used the seniors’ CPI, the Consumer Price Index for the Elderly (CPI-E), from the time it was introduced in 1983, the additional benefits for persons who retired then would be enough to pay a significant portion, and in some cases all, of the Medicare Part B premium today.

Although the Bureau of Labor Statistics has maintained the CPI-E since 1983, our government has never used it to calculate COLAs.  Instead, the government uses a more slowly growing CPI, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).  Studies by Advisor editor Mary Johnson have found that, in all but one year since 1984, the CPI-E would have yielded a higher COLA, and that difference in benefits compounds over time.

In one example of the new analysis, a senior who retired in 1984, with a monthly benefit of $599, would have a benefit of $1,146 today.  If the government had used the CPI-E to calculate the COLA, however, that same retiree would have $88.50 per month more in 2006 — enough to pay the entire Medicare Part B premium.  In fact, had the government used the CPI-E, the higher amount in Social Security for that individual would have covered the entire cost of Medicare premiums since 1996.

Despite widespread support for CPI-E legislation, however, Congress has not acted.  To the contrary, last year Congressional leaders reviewed a number of proposals that would cut COLAs by switching to an even more slowly growing "chained" CPI. 

TSCL is carefully monitoring signs that Congress may try to go forward with similar measures this year.  Through your grassroots efforts, TSCL was successful in fighting off COLA cuts in 2005.  We urge you to help us keep COLA cuts out of proposals to cut the deficit in 2006.  TSCL continues to push for a more adequate COLA based on the CPI-E that more accurately reflects seniors’ costs.

Sources: "2005 CPI-E Study, Retiree With Benefit of $599 in 1984," Mary Johnson, TREA Senior Citizens League, November 11, 2005.  "2005 Medicare Trustees Report," March 23, 2005, page 156.

December 2005