Get Connected
  • facebook
  • twitter
Print

AARP fights index change

State Social Security recipients will likely get one of the smallest cost-of-living increases in program history next year, a fact local AARP officials say underscores their opposition to a proposal to re-tool how those increases are calculated.

With Washington politicians debating whether to include Social Security and Medicare reform as part of budget negotiations set to commence later this year, AARP representatives say they would prefer Congress get its short-term budget fixed first, before turning to entitlement reform.

"We've been very clear that Social Security is not a piggy bank," AARP state director Gaylene Miller said. "It needs to have its own conversation, it shouldn't be part of some political bargain or backroom deal."

Washington began pulling itself back off a ledge Thursday, after pushing the nation to the financial brink with a 16-day government shutdown and near-default on U.S. debt.

Senate Majority Leader Harry Reid, D-Nevada, and Minority Leader Mitch McConnell, R-Ky., were able to negotiate and push through a last-minute compromise that funds the government through Jan. 15, and lifts the so-called debt ceiling until Feb. 7.

The deal, which was pushed heavily by a bipartisan group of 14 senators, including Sen. Joe Manchin, D-W.Va., also calls for Congressional leaders to appoint a committee to finally come together an negotiate a compromise budget that will keep the government running for the rest of the fiscal year.

However, there was debate among lawmakers Thursday morning as to whether this committee should start simple and craft a one-year budget plan, or work on some type of "grand bargain," that not only works to balance the budget over several years, but also reform the country's health care and retiree programs.

One popular proposal, which President Barack Obama included in his budget proposal earlier this year, was the changed the way the government calculates inflation for these programs, moving it to the so-called chained-CPI calculation.

Currently, the government uses the Consumer Price Index for urban workers to calculate annual inflation, or cost-of-living adjustments, for government programs, including Social Security.

The chained-CPI is a separate calculation that factors in a consumer's ability to substitute between higher and lower-cost goods, and therefore leads to smaller inflation measurements. Those narrower measurements would mean smaller cost-of-living adjustments, therefore saving the government money.

AARP opposes switching to the chained CPI measure, and Miller said recent inflation projections support the organization's position.

The U.S. government was supposed to release its latest cost-of-living adjustment for Social Security this month. But due to the current government shutdown, that didn't happen.

Meanwhile, The Associated Press earlier this week conducted its own analysis using preliminary inflation figures and said retirees should expect a roughly 1.5 percent benefit increase next year -- one of the smallest since the automatic adjustments began in 1975. 

Since 1975, the adjustments have averaged 4.1 percent. Only six times have they been below 2 percent. There was no adjustment in 2010 or 2011, because inflation was too low, and last year the adjustment was 1.7 percent.

While the last three years have brought small or no adjustments, Miller said seniors have been forced to absorb large increases in utility and prescription drug prices over the same time period.

"We think the current formula of calculating the COLA is flawed," she said. "It doesn't really fly in West Virginia or for older people, because the kind of things they buy are not as included in that urban market basket."

She said the average senior spends about 17 percent of their income on out-of-pocket medical costs. Meanwhile, the current CPI calculations only gives medical costs about a 7 percent weighting in its calculation.

"There's a current problem and it will only be exacerbated by the chained CPI calculation," she said.

While AARP expects the adjustment for next year to be between 1.5 and 1.7 percent, Miller said the chained CPI calculation would have lowered that to 1.2 to 1.4 percent.

With Social Security representing 90 percent or more of the income for one out of every four seniors in the state, Miller said West Virginia seniors stand to lose a great deal over time should the chained CPI measure be enacted.

That's why the organization has been pushing to separate Social Security reform from the current budget process. AARP leaders say that would give Congress more flexibility to explore other options, like increasing the cap on payroll taxes or limiting benefits for some wealthier retirees.

"We need our leaders to find solutions and common ground and work toward compromise that allows Social Security and Medicare to have their own conversations on how we strengthen them for the future," Miller said.

"It's not just AARP's opinion, we've been hearing it's from the people," she said. "Regardless of a person's political party, their gender, income or where they are in the age spectrum, by far and away our people think these are earned benefits that should have their own conversation."

Contact writer Jared Hunt at business@dailymail.com or 304-348-4836.


Print

User Comments