Last week, I attended a briefing on Social Security’s cost-of-living adjustment (COLA), which has remained stagnant for the past two years. The National Academy on Social Insurance (NASI) hosted the briefing and released a new fact sheet which explains the COLA’s current purpose and presented on updating it to better reflect the cost-of-living for Social Security beneficiaries.
Currently Social Security benefits are adjusted each year through the Consumer Price Index for Workers (CPI-W). As NASI points out, however, the living costs for seniors are rising at a faster rate than other households, primarily because they use more medical care, the cost of which is rapidly increasing. Medicare eligible elders in good health spend a significant amount of their budget on out-of-pocket health care expenses. According to WOW’s Elder Index, a single elder in good health spends $254 a month on health care, which represents 15% of overall expenses. For those with long-term care needs, their monthly expenses can double or even triple, depending on the level of care needed. It has been proposed to use the Consumer Price Index for the Elderly (CPI-E), instead, to make adjustments to Social Security benefits. The CPI-E weights health care expenses more than the CPI-W to better reflect an elder’s costs. WOW is supportive of efforts to improve the COLA for Social Security beneficiaries and recommends re-visiting the methodology and data collection for the experimental CPI-E prior to applying it as an adjustment to Social Security benefits.
The COLA freeze is hurting vulnerable seniors’ ability to make ends meet. The COLA should assist seniors in meeting the rising costs of necessities like food and health care. Something must be done to ensure seniors do not have to make tough choices in regards to their basic needs – a more accurate measure of the true costs of living and adjustment to the COLA are steps in the right direction.
Communications & Program Coordinator
Elder Economic Security Initiative