For the millions of seniors who rely on Social Security, the cost of living adjustments aren’t used to purchase cruise vacations on the Caribbean or extra cable shows. Social Security's Cost-of-Living Adjustment (COLA) is designed to help beneficiaries keep up with the constantly rising cost of living during retirement. COLAs help seniors purchase food, medicine and pay their heating and utility bills. The current CPI-W COLA formula, while helpful, does not come close to staying in line with the skyrocketing cost of health care which eats up a significant portion of every retiree's benefit.  Yet, despite the fact that the average senior spends 27% of his or her benefit on Medicare Parts B & D out-of-pocket costs alone, some in Congress are proposing cutting the COLA beginning January 2012 by moving to a chained-CPI formula. As a result of the recession, the past two years have yielded a zero COLA for the first time in the history of the automatic system.  And although the Trustees are predicting a small COLA for 2012, for most beneficiaries the additional money will almost entirely go to cover the increase in their Medicare premiums. It’s not clear to us at the National Committee how a zero COLA has been overly “generous.” Rep. Xavier Becerra (D-CA), recently released new analysis which provides some startling numbers to this chained-CPI proposal.
"Switching to a chained-CPI will permanently cut COLAs for generations of retirees and the disabled - making it harder and harder for them to make ends meet.  For the first time, the new analysis released by Rep. Becerra puts a number behind the policy - over time the annual benefit cut will total almost $1,400. We at the National Committee agree it is critical that the COLA be calculated based on an accurate formula.  But if accuracy is really the goal, Congress should change the COLA formula to factor in the large health care expenses most seniors face." Max Richtman , Executive Vice President/Acting CEO
In deficit reduction talks, many in Congress claim cuts they’re considering won’t affect current seniors. That couldn’t be further from the truth.
"Proponents of cutting Social Security have repeatedly pledged that current retirees would not be affected by any of the changes they are considering.  Yet their chained-CPI formula, which we hear is still 'on the table' in deficit reduction costs, will cut benefits for every single Social Security beneficiary beginning next January." Max Richtman
The National Committee supports calculating the COLA by using the CPI-E, an index reflecting greater accuracy of retiree's spending priorities that has been undergoing testing by the Bureau of Labor Statistics for decades.