THE NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY & MEDICARE
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November 16, 2011

NEWS RELEASE

Leading Seniors Organization Endorses Legislation Creating New Cost of Living Formula for Seniors

The CPI-E Would Measure Seniors' Actual Costs

The National Committee to Preserve Social Security and Medicare has endorsed legislation introduced by Senators Sherrod Brown (D-OH) and Barbara Mikulski (D-MD) creating a more accurate cost of living adjustment (COLA) formula for America's seniors.   The CPI-E was developed in 1987 to reflect the different spending patterns of consumers age 62 and older. This formula acknowledges health costs have been rising much faster than other expenses, and that those costs represent a much larger percentage of seniors' monthly spending than is the case with other demographic groups. The CPI-E is a more accurate measure of the real-world expenses retirees face than the current COLA formula and far more accurate than the proposed Chained CPI which would cut projected benefits over time.

"Seniors across this nation understand how important having an accurate measure of their real costs is to their day-to-day survival.  Under the current formula, seniors received two years of zero COLA's even though their expenses continued to rise.  Now some suggest even that amount was too much. Rather than proposing formulas designed to cut benefits, like the chained CPI currently being considered by the supercommittee, Congress should pass a formula created specifically for the beneficiaries served.  The CPI-E legislation proposed by Senators Brown and Mikulski would offer inflation protection that accurately represents the expenses seniors face each year.

There has been a lot of talk about the need to find a more accurate COLA formula.  We agree, however, the proposed chained CPI isn't it. Not only is this formula less accurate for seniors than the current method it will in fact cut projected benefits for current and future retirees.  If accurate inflation protection is truly our goal, the CPI-E is the formula created specifically to address the costs facing America 's seniors and should be adopted by Congress."  Max Richtman, NCPSSM President/CEO

The CPI-E has reflected a rate 0.3 percentage points higher than inflation as measured under the current method.  This is primarily attributable to the greater weight placed on health expenditures in this index, reflecting the continued rise in health care costs at a faster rate than other expenses.

However, the chained CPI-U being considered by the supercommittee produces lower estimates of inflation than the current CPI does, averaging about 0.3 percentage points lower than the increases in the current CPI since December 2000. The Chief Actuary of the Social Security Administration estimates that this reduced COLA would result in a decrease of about $130 per year (0.9 percent) in benefits for a typical 65 year-old. By the time that senior reaches 95, the annual benefit cut will be almost $1400, a 9.2 percent reduction from currently scheduled benefits.

The National Committee's letter endorsing Senators Brown and Mikulski's CPI-E legislation is posted at http://www.ncpssm.org/news/archive/brown_cpie_letter/ .

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The National Committee, a nonprofit, nonpartisan organization acts in the interests of its membership through advocacy, education, services, grassroots efforts and the leadership of the Board of Directors and professional staff. The work of the National Committee is directed toward developing better-informed citizens and voters.

Media Inquiries to:
Pamela Causey 202-216-8378/202-236-2123
Kim Wright 202-216-8414
www.ncpssm.org