New COLA for seniors
With medical costs for American senior citizens eclipsing the average wage earner’s, two U.S. senators introduced a bill this week to have cost of living adjustments for Social Security benefits to more accurately reflect senior citizens expenses.
U.S. Sens. Sherrod Brown, D-Ohio, and Barbara Mikulski, D-Md., announced Wednesday the introduction of their bill, the Consumer Price Index for Elderly Consumers Act, which would change the cost of living adjustments from an average wage earner in the United States to expenses incurred by senior citizens.
“Too many seniors, who have worked hard and played by the rules, require Social Security just to live, to just pay for their necessities as their costs for energy, food and prescription drugs continue to rise,” Brown said Wednesday during a media teleconference. “In far too many cases, Social Security income has become their sole source of retirement income, or the majority of their retirement income — partly because a financial crisis wiped out retirees pensions, 401(k)s
“Last month, the Social Security Administration announced that seniors would get their first cost-of-living adjustment increase in more than two years,” the U.S. senator from Ohio said. “But while seniors will finally receive a COLA in 2012, the increase is less than it should be. It is time to give seniors the level of benefits they deserve — and that starts with fair COLAs.”
He explained the current formula used to calculate COLAs for Social Security recipients measures the costs for younger, employed individuals and does not reflect a retirees’ true expenses, which can include high prescription drug bills.
Social Security COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W. The CPI-W, which was established in 1972 as the nation’s measure, was chosen to measure inflation because it was the only measure available at the time.
The CPI-W measures changes in the prices of goods and services purchased by those who earn more than half their income from clerical or wage occupations. Brown explained the CPI-W formula only represents about 32 percent of the U.S. population and does not accurately represent the inflation experience of older Americans.
Citing a report from the Congressional Research Service, the cost of living under the CPI-W rose at an average rate of 2.9 percent between 1982 and 2009, while the cost of living for seniors — as measured by an experimental Consumer Price Index for the Elderly, or CPI-E, — rose at a rate of 3.2 percent.
Brown’s and Mikulski’s legislation would shift the Social Security payments from CPI-W to CPI-E since the latter index takes into account seniors’ specific consumption habits — specifically prescription drug and energy costs.
“This is like comparing apples to oranges — it doesn’t make sense because their life circumstances and needs are completely different,” Brown said. “The longer a retiree lives, the more their Social Security check loses value. That’s why we should change the formula to better reflect the real cost of living for seniors in Ohio and across the country.”
Brown said he and Mikulski argue the chained CPI, or the CPI-U, a proposal by the Joint Select Committee on Deficit Reduction, or the supercommittee, appointed by President Barack Obama, would make further changes to a cost of living adjustment which would negatively affect seniors. The chained CPI would slash Social Security benefits by approximately $800 per year and effectively impose a tax increase that would heavily impact seniors and other low-income families.
“This would be a regressive tax — it would mean less money for seniors,” Brown said. “We need to reduce the deficit, but not on the backs of senior citizens. Since Social Security is financed separately from the rest of the federal budget, it should be addressed separately as well.”
Mikulski said Congress should be working to preserve the social contract the United States has with the country’s senior citizens.
“Social Security shouldn’t be in the debate about how to reduce our debt or our deficit,” Mikulski said in a news release and reiterated by Brown during the teleconference. “It didn’t cause our debt. It didn’t cause our deficit. We must ensure the safety and solvency of Social Security so that benefits are based on the reality of how our seniors live and what their costs are.”
The legislation proposed by Brown and Mikulski is supported by the AARP, the AFL-CIO, the United Steelworkers, the UAW, the Alliance for Retired Americans, and National Nurses United, among other groups.legislation is supported by the AARP, the AFL-CIO, the United Steelworkers, the UAW, the Alliance for Retired Americans, and National Nurses United, among other groups.
Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, said his group also supports the bill and noted senior citizens are well aware of “how important having an accurate measure of their real costs is to their day-to-day survival.”
“It is well past time that we have the COLA be applied to reality,” Richtman said. “Rather than proposing formulas designed to cut benefits, like the chained CPI currently being considered by the Super Committee, Congress should pass a formula created specifically for the beneficiaries served.”
For one Northeastern Ohio senior citizen, Belle Likover, the fight is over an insurance program that she and her husband paid into for their retirement.
“Social Security is not an entitlement program, it is an insurance program that we have paid into during our working years,” Likover said. “Calling it an entitlement program, like welfare is not right, it is a program we paid into and should be able to count on when we are retired.”