This year, seniors are receiving the lowest cost-of-living adjustment (COLA) paid in the past decade, at just 1.7 percent. The low COLA comes close on the heels of two years when no COLA was paid, in 2010 and 2011. After lobbying for emergency COLAs during those years, TSCL was disappointed that Congress did not enact one to help offset increases in Medicare premiums and to protect the buying power of Social Security benefits.
TSCL strongly believes that the Social Security COLA that seniors receive does not accurately reflect how they must spend their money. Our studies and surveys indicate that the current COLA is growing too slowly and does not accurately measure inflation experienced by seniors. In fact, an analysis by TSCL in 2012 found that seniors have lost 34 percent of their purchasing power since 2000.
Currently, the COLA is based on a consumer price index (CPI) that reflects how young, urban workers tend to spend their money, called the CPI-W. However, older Americans spend a disproportionate share of their household budget on health care and the CPI-W fails to capture that. Since health care costs continue to rise so quickly – and since most health care spending cannot be substituted for something cheaper – TSCL believes that seniors would be better served if their COLA were based upon a consumer price index for elderly consumers, or the CPI-E.
The CPI-E regularly puts the spending inflation for seniors at two-tenths of a percentage point higher than the rate at which the CPI-W increases. That may seem like an insignificant amount, but over a twenty-five year retirement, COLAs do accumulate. We estimate that a senior who retired with average benefits in 1984 would have received $13,723.16 more through 2011 if the CPI-E had been used.
TSCL members and supporters believe that the CPI-E should be fully implemented and utilized for determining seniors’ Social Security COLAs each year, and we are very supportive of legislation such as the Consumer Price Index for Elderly Consumers Act. We also support legislation which would protect seniors in years like 2010 and 2011, when there was no COLA, by providing a guaranteed COLA each year. In addition, we will tirelessly fight proposals in the 113th Congress that aim to reform Social Security by cutting COLAs.