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Chained CPI Affects More Than Social Security COLA, Seniors Would Get Less, Pay More

The Seniors Citizens League (TSCL) continues to be an unrelenting fighter to preserve Social Security and the cost-of-living allowance now in place - COLA for 2014 should be announced this month

By Tucker Sutherland, editor

Oct. 2, 2013 – While most of the media attention on the U.S. government is focused on the Republican efforts to defund the Affordable Care Act, and the government shutdown this has caused, many seniors are worrying more about their Social Security and the cost-of-living allowance (COLA) increase that is normally announced in October. And, too, there is plenty of concern about a proposal to change the way the COLA is determined – using a different consumer price index – that most experts predict will significantly decrease these increases.

The Seniors Citizens League (TSCL), which claims to be one of the nation’s largest nonpartisan seniors groups, has probably been the most active in fighting to preserve Social Security and the current method of determining the COLA.

“Most seniors are aware of the impact of the consumer price index (CPI) on their cost-of-living adjustments (COLAs).  But a widely-debated deficit reduction proposal that would switch to the more slowly-growing ‘chained’ CPI to determine COLAs would have far greater impact than Social Security cuts alone if applied government-wide, warns TSCL.

President Obama included the proposal in his fiscal year 2014 budget plan, and it has won support among Congressional proponents on both sides of the aisle, according to TSCL. 

“Chaining the COLA is getting so much attention because it’s a deficit cutter’s magic bullet,’” says Larry Hyland, Chairman of TSCL.  The Congressional Budget Office has estimated that the proposal would cut federal spending by $216 billion and increase revenues by $123.7 billion - reducing the deficit by $339.8 billion in the first ten years alone.

The group points out that in addition to Social Security, beneficiaries of the Supplemental Security Income program (SSI), military retirement and veterans programs, Rail Road Retirement, civil service and federal workers programs - more than 62.5 million beneficiaries in all— would bear the brunt of the cuts by receiving lower benefits. 

 

Related Archived Stories

 
 

> Last year's announcement:

Social Security Says 1.7 Percent COLA for 2013, Modest Bump More Than Expected

Average retired senior will get $21 per month more; retired couple $34

Oct. 16, 2012


Read more Social Security News

also check Medicare and Senior Politics

 

But in addition to the cut in income, TSCL says the change would also increase seniors’ costs. Specifically:

   • Some Medicare coverage would become less generous, such as more slowly-growing Part D coverage amounts.

   • Fewer low-income seniors would qualify for Medicaid, or such seniors would have to wait longer to qualify.  This could include nursing home stays as the income limits rise more slowly.

   • Fewer low-income seniors would qualify for food stamps, and the food stamp benefit would grow more slowly.

   • Seniors would pay more in taxes as tax brackets, exemptions, and deductions, which are indexed to the CPI, rise more slowly.

TSCL has compiled a chart, “12 Ways Seniors Would Get Less, Pay More”, which illustrates these effects. (See chart below news report)

“Efforts have been quietly underway for months to lay the groundwork for a far-reaching fiscal deal that involves Social Security cost-of-living adjustments (COLAs) and Medicare benefits,” Hyland notes.

“It’s important for older Americans to realize that switching to the “chained” CPI is no single, or small, one-time cut.  It’s a permanent annual cut across multiple senior programs that grows bigger over time the longer one lives,” Hyland states.  “In the meantime senior taxpayers would pay more in taxes,” he adds.

TSCL is fighting “Chaining the COLA” and higher Medicare costs, and encourages seniors to attend town hall meetings and to contact their Members of Congress.  To learn how much COLA cuts would cost you, try TSCL’s Chained COLA calculator.  To subscribe to TSCL’s newsletter The Social Security and Medicare Advisor, visit www.SeniorsLeague.org.

12 Ways Seniors Would Get Less, Pay More

Efforts are quietly underway to lay the groundwork for a far-reaching fiscal deal that involves Social Security cost-of-living adjustments (COLAs) and Medicare benefits. White House officials and Senate Republicans have met in a series of private sessions in recent months.

In his fiscal year 2014 budget, President Obama proposed reducing the growth in COLAs as well as raising Medicare premiums, reducing benefits of higher income seniors and increasing the Medicare eligibility age. Everything is still on the table, the pressure point being the debt limit. The government is expected to hit the debt limit ceiling – the statutory borrowing limit—sometime this fall.

Most seniors are aware of the impact of the consumer price index (CPI) on COLAs. But switching to the more slowly growing “chained” CPI, if applied government-wide, would be far more reaching than Social Security cuts alone. In every aspect where applied, seniors would receive less in benefits and pay more in higher taxes. The following chart illustrates:

The Chained CPI — How Seniors Get Less And Pay More

Program

What Chained CPI Affects

Impact on Seniors

Income taxes

Tax brackets, personal exemptions, deductions

Higher taxes as tax brackets, exemptions, and deductions rise more slowly.

Social Security — retirement, survivors, disability benefits

COLAs

Lower lifetime benefits –Seniors with average benefits of $14,400 in 2013 would lose an estimated $27,500 over a 30-year retirement.

Medicare

Some benefits indexed annually

Less generous coverage such as, lower Part D initial coverage amounts leaving seniors at risk of higher out-of-pocket costs due to hitting doughnut hole.

     

Supplemental Security Income (SSI)

COLAs

Lower SSI benefits over the period they are received.

Supplemental Nutritional Assistance Program (SNAP, formerly food stamps)

Benefit amount, income eligibility guidelines

Food stamp benefits would grow more slowly, fewer low-income seniors would qualify.

Civil Service and Federal Employees Retirement Systems

COLAs

Lower lifetime benefits.

Military Retirement System

COLAs

Lower lifetime benefits.

Military Dependency and Indemnity Compensation

COLAs

Lower benefits for survivors.

Veterans’ Disability Compensation

COLAs

Lower benefits.

Veterans’ Pensions

COLAs

Lower lifetime pension payouts.

Railroad Retirement, Tier 1, Tier II benefits

COLAs

Lower lifetime benefits

Medicaid 

Eligibility for long-term care services and supports 

 

Fewer low-income seniors would qualify for nursing home care, or would have longer “spend down” waiting periods.

To learn how much COLA cuts would cost you, try TSCL’s Chained COLA calculator.

Sources: ”Senate Republicans, White House Officials Meet Privately on Fiscal Deal,” Paul M. Krawzak, CQ Roll Call, June 6, 2013. “Inflation – Indexing Elements in Federal Entitlement Programs,” Dawn Nuschler, Congressional Research Service, April 24, 2013.

 

 

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