A bill has been introduced in the Senate by Senator Mazie Hirono (D-Hawaii) that would, among other things, change the formula that Social Security would use to determine the annual COLA. The formula would use a formula that more accurately reflects the costs that seniors experience during a given year.
To determine consumers’ day-to-day living expenses and thus measure the rate of inflation consumers face in the marketplace, the government collects data on a “market basket” of goods and services. This includes food and beverage, housing, apparel, recreation, education, transportation, and medical care.
Research has shown that spending patterns differ between the elderly and the general population, especially in the health care category. Seniors 65 and older spend more than twice as much on health care, and those 75 and older spend nearly three times more on health care than younger consumers.
Not only do health care expenditures steadily increase with age but health care costs have also consistently risen much faster than other market basket categories. The current price index (CPI-W) does not take these critical differences in the elderly population into consideration.
The new bill, called the Protecting and Preserving Social Security Act, would have to be passed by the full Congress before the end of this year to become law so, in our analysis, it is unlikely to do so.
However, we are pleased that the bill has been introduced and if it does not pass this year, we hope it will be introduced again early next year in the new Congress.