Washington, D.C.--Congressman Eliot Engel called on the House Ways and Means Committee to alter the formula used to determine the Social Security Cost of Living Adjustment (COLA) for seniors. This comes after a report by the Social Security Administration there would be no COLA increases for 2010 and likely none for 2011-12.

“Many seniors,’ said Rep. Engel, “live on a fixed income and have come to depend on their annual COLA to pay for ever-increasing living expenses, such as health care costs. This is especially vital for New York’s seniors, as our state has some of the highest costs of living in the nation.”

Since 1975, retiree benefits have been adjusted annually to keep pace with inflation. The Social Security COLA is tied to the consumer price index (CPI-W), which represents the cost of consumer goods and services consumed by average workers, compared with the same quarter of the previous year. As a result, seniors received a record increase in a COLA last year, as inflation skyrocketed due to unprecedented increases in the cost of gas and oil. However, it precipitously dropped in December and has remained low ever since. It is highly unlikely the economy will grow fast enough this year to overcome the difference.

Instead of using the CPI-W, Rep. Engel suggests that COLA's be calculated through the use of the Experimental Consumer Price Index for Americans 62 Years of Age and Older (CPI-E), also calculated by the BLS, which takes into account seniors’ spending habits.

“Differences in the utilization of healthcare visits and prescription drugs is key towards understanding the difference between using CPI-E over CPI-W. A Congressional Research Service report indicates those 65 and older spent more than twice as large of a share on their total outlays on health care as did the overall population. The numbers rise to three times as much for those 75 and older. This is yet another reason why our current health care system is unsustainable and must be changed,” said Rep. Engel, a senior member of the House Energy and Commerce Committee, and a member of the Subcommittee on Health.

Rep. Engel added, “COLA is currently based on an outmoded statistic and there is a dire need for more accurate indicators based on how seniors actually spend their money. Seniors are experiencing spiraling health costs and are too often caught up in the web of fees and escalating rates, which eats into whatever savings they have.”

Under current law, 75 percent of seniors on Medicare will be protected from increases in their Medicare Part B premiums, so their Social Security payments will not shrink because of rising Medicare Part B 2010 costs. Eligible low-income seniors enrolled in Medicare Part D can receive assistance in paying their premiums by signing up for the “low-income subsidy” through the Social Security Administration.

Rep. Engel added, “Congress is attempting to address the big picture expenses associated with energy and health care this year. As we work to cut costs on the larger scales, we must also pay close attention to ways to make our system more efficient and save money for the people who need it the most. By providing a more equitable method for COLA payments, we can make a real difference in the pocketbooks of the people who have already given so much to our nation. I am sure, even in our current economic downturn, we can find a way to lessen the economic burden on our seniors.”